Exchange-Rate Determination

Consulting firms that use large-scale econometric models to forecast exchange rate movements are engaging in ?

A. judgmental analysis
B. fundamental analysis
C. technical analysis
D. nontechnical analysis

Suppose that the purchasing power parity estimate of the dollar/euro exchange rate is $1.30 per euro, and the current spot rate is $1.3 8 per euro. Comparing these two exchange rates from a long-run viewpoint you would ?

A. anticipate the dollar to depreciate against the euro
B. anticipate the dollar to appreciate against the euro
C. anticipate the dollar’s exchange rate against the euro to remain constant
D. have no anticipation concerning future movements in the dollar/euro exchange rate

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Suppose that rising U.S income leads to higher sales and profits in the United States This would likely result in ?

A. increasing portfolio investment into the United States
B. decreasing portfolio investment into the United States
C. increasing direct investment into the United States
D. decreasing direct investment into the United States

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Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium economic theory suggests that the nation’s balance of payments would move into a surplus position if there occurred in the nation a (an) ?

A. increase in the money demand
B. decrease in the money demand
C. increase in the money demand
D. None of the above

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Which example of market expectations causes the dollar to depreciate against the yen – expectation that the U.S economy will have ?

A. faster growth than Japan
B. higher future interest rates than Japan
C. more rapid money supply growth than Japan
D. lower inflation rates than Japan

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Under a system of floating exchange rates relatively high productivity and low inflation rates in the United States results in a (an) ?

A. increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
B. increase in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar
C. decrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
D. decrease in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar

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Under a system of floating exchange rates relatively low productivity and high inflation rates in the United States results in a (an) ?

A. increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
B. increase in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar
C. decrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar
D. decrease in the demand for foreign currency and increase in the supply of foreign currency and a appreciation in the dollar

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Given a system of floating exchange rates rising income in the United States would trigger a (an) ?

A. increasing in the demand for imports and an increasing in the demand for foreign currency
B. increase in the demand for imports and decrease in the demand for foreign currency
C. decrease in the demand for imports and an increase in the demand for foreign currency
D. decrease in the demand for imports and a decrease in the demand for foreign currency

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For the United States suppose the annual interest rate on government securities equals 8 percent while the annual inflation rate equals 4 percent, For Switzerland the annual interest rate on government securities equal 10 percent while the annual inflation rate equals 7 percent the above variables would cause investment funds to flow from ?

A. the United States to Switzerland causing the dollar to depreciate
B. the United States to Switzerland causing the dollar to appreciate
C. Switzerland to the United States causing the franc to depreciate
D. Switzerland to the United States causing the franc to appreciate

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The exchange value of the U.S dollar is primarily determined by ?

A. the rate of inflation in the United States
B. the number of dollars printed by the U.S government
C. the international demand and supply for dollars
D. the monetary value of gold held at Fort Knox, Kentucky

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