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.Management Sciences
Category: Exchange-Rate Determination
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
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
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
The relationship between the exchange rate and the prices of tradable goods is known as the ?
A. purchasing power parity theory
B. asset markets theory
C. monetary theory
D. balance of payments theory
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
IF when cost $4 per bushel in the United States and 2 pounds per bushel in Great Britain then in the presence of purchasing power parity the exchange rate should be ?
A. $50 per pound
B. $1.00 per pound
C. $2.00 per pound
D. $8.00 per pound
Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?
A. flow from the United States to foreign countries
B. flow from foreign countries to the United States
C. remain totally in foreign countries
D. remain totally in the United States
The asset market approach views exchange rates as being determined mainly by ?
A. the use of import tariffs and quotas by governments
B. the current account balance of each country
C. the relative growth rate of national output between countries
D. efforts of investors to balance their portfolios among financial assets denominated in different currencies
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
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