Exam 10: Trading Dollars for Dollars Exchange Rates and Payments With the Rest of the World

When Canadian GDP increases, the import effect usually dominates the growth effect on the value of the Canadian dollar.

If the interest rate in Japan is less than the interest rate in Canada, rate of return parity suggests that

The import effect suggests that when the exchange rate rises, Canadians buy more imported products.

An appreciating Canadian dollar causes stagflation.

When Canadian real GDP increases, the growth effect alone causes the Canadian dollar to depreciate.

An inflationary gap results from

When the Canadian Teachers Pension Plan buys stock in the U.S.-based Apple Corporation, the effect on the foreign exchange market is a

A financial account surplus means that Canadians invested more in R.O.W. than R.O.W. invested in Canada.

Which statements are true? If the exchange rate changes from C$1 = US$1.10 to C$1 = US$0.90, then the: 1) Canadian dollar depreciated against the U.S. dollar. 2) Canadian dollar appreciated against the U.S. dollar. 3) U.S. dollar depreciated against the Canadian dollar. 4) U.S. dollar appreciated against the Canadian dollar.

A depreciating Canadian dollar causes a positive demand shock because export spending increases and import spending decreases.

A floating exchange rate is determined by governments or central banks in foreign exchange markets.

Which activity is a positive entry on the Canadian financial account?

Flows of Canadian dollars into Canada are negative numbers on the balance of payments accounts.

The direct impact on Canadian inflation of an exchange rate depreciation occurs because

When the price of imports to Canada rise, measured in Canadian dollars, the inflation rate rises in Canada.

An inflationary gap can be caused by a depreciation of the Canadian dollar and increased exports.

When most currency speculators expect the Canadian dollar to depreciate, the

When Canadian real GDP decreases, the growth effect alone causes the Canadian dollar to depreciate.

As the Canadian dollar weakens, Canadian

The market in which the currency of one country exchanges for the currency of another country is the