A. the inflation rate in each country will necessarily equal zero
B. the inflation rate in each country will necessarily equal 1 percent
C. the exchange rates are said to be fixed pegged to each other
D. purchasing power parity holds
Related Mcqs:
- Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?
A. 0.67 pesos = $1
B. 0.8 pesos = $1
C. 1.25 pesos = $1
D. 1.67 pesos = $1 - During the era of dollar appreciation from 1981 to 1985 a main reason why the dollar did not fall in value was ?
A. flows of foreign investment into the United States
B. rising price inflation in the United States
C. a substantial decrease in U.S imports
D. a substantial increase in U.S exports - Suppose that U.S dollar depreciates 70 percent against the yen yet Japanese export prices to Americans did not decrease by the full extent of the dollar depreciation. This is best explained by ?
A. partial currency pass through
B. complete currency pass through
C. partial J curve effect
D. complete J curve effect - A primary reason that explains the appreciation in the value of U.S dollar would be ?
A. large trade surpluses for the United States
B. high inflation rates in the United States
C. lack of investor confidence in U.S money policy
D. high interest rates in the United States - The appreciation in the value of the dollar in the early 1980s is explained by all of the following except ?
A. the United States being considered a safe haven by foreign investors
B. relatively high real interest rates in the United States
C. confidence of foreign investors in the U.S economy
D. relatively high inflation rates in the United States - 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 - The high foreign exchange value of the U.S dollar in the early 1980s can best be explained by ?
A. additional investment funds made available from overseas
B. lack of investor confidence in U.S fiscal policy
C. market expectations of rising inflation in the United States
D. American tourists overseas finding costs increasing - Complete currency pass through arises when a 10 percent depreciation in the value of the dollar causes U.S?
A. import prices to fall by 10 percent
B. import prices to rise by 10 percent
C. export prices to rise by 10 percent
D. export prices to fall by 10 percent - 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 - Assume that the United States faces a percent inflation rate while no (zero) inflation exists in Japan. According to the purchasing power parity theory over the long run the dollar would be expected to ?
A. appreciate by 8 percent against the yen
B. depreciate by 8 percent against the yen
C. remain at its existing exchange rate
None of the above
