## Relatively high real interest rates in the United States tend to ?

A. decrease the foreign demand for dollars causing the dollar to depreciate
B. decrease the foreign demand for dollars causing the dollar to appreciate
C. increase the foreign demand for dollars causing the dollar to depreciate
D. increase the foreign demand for dollars causing the dollar to appreciate

## 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

## For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

A. The United States to Japan causing the dollar to depreciate
B. The United States to Japan causing the dollar to appreciate
C. The Japan to United States, causing the dollar to depreciate
D. The Japan to United States, causing the dollar to appreciate

## When the price of foreign currency (i.e the exchange rate) is below the equilibrium level ?

A. an excess demand for that currency exists in the foreign exchange market
B. an excess supply of the currency exists in the foreign exchange market
C. the demand for foreign exchange shifts outward to the right
D. the demand for foreign exchange shifts backward to the left

## 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

## Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

A. the Canadian current account balance is in surplus
B. the Swiss current account balance is in deficit
C. the Canadian current account balance is in equilibrium
D. the Swiss current account balance is in equilibrium

## Relatively low real interest rates in the United States tend to ?

A. decrease the foreign demand for dollars causing the dollar to depreciate
B. decrease the foreign demand for dollars causing the dollar to appreciate
C. increase the foreign demand for dollars causing the dollar to depreciate
D. decrease the foreign demand for dollars causing the dollar to appreciate

## The assets market approach is most helpful in explaining ?

A. why exchange rates remain quite stable
B. why governments change their money supplies
C. long term exchange rate movements
D. short term exchange rate movements

## 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

## 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

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