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.Management Sciences
Category: Exchange-Rate Determination
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
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
Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?
A. appreciation; trade surplus
B. appreciation; trade deficit
C. depreciation; trade surplus
D. depreciation; trade deficit
Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?
A. faster economic growth than Japan
B. higher future interest rates than Japan
C. more rapid money supply growth than japan
D. higher inflation rates than japan
Exchange rate overshooting often occurs because ?
A. domestic prices adjust slowly to shifts in demand
B. military spending during military conflicts
C. elasticities are smaller in the long run than the short run
D. elasticities are smaller in the short run than the long run
The purchasing power parity theory has limitations in forecasting exchange rate fluctuations for all of the following reasons except ?
A. inflation effects exchange rates
B. international capital flows affect exchange rates
C. governments sometimes impose trade restrictions such as tariffs and quotas
D. not all products are internationally tradeable
If a Big Mac hamburger sells for the same dollar value in New York as in London then ?
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
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
If Canada runs a balance of payments surplus and exchange rates are floating ?
A. the value of other currencies will rise relative to the dollar
B. the dollar will depreciate relative to other currencies
C. the price of foreign goods will become cheaper to Canadians
D. the price of foreign goods will rise for Canadians
In the presences of purchasing power parity, if one-dollar exchanges for 2 British pounds and if a DVD player costs $400 in the United States then in Britain the DVD player should cost ?
A. 200 pounds
B. 400 pounds
C. 600 pounds
D. 800 pounds
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