Suppose the nominal exchange rate (given as foreign currency per unit of U.S. currency as in class) rises. If purchasing power parity holds, this could mean that domestic prices __________________ or foreign prices ________________ with all else unchanged. Group of answer choices A) increased, decreased B) decreased, decreased C) increased, increased D) decreased, increased

Suppose the nominal exchange rate (given as foreign currency per unit of U.S. currency as in class) rises. If purchasing power parity holds, this could mean that domestic prices __ or foreign prices with all else unchanged. Group of answer choices A) increased, decreased B) decreased, decreased C) increased, increased D) decreased, increased

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: International Finance

Section: Chapter Questions

Problem 11QP

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(a) Suppose a computer sells for US$1,200 in the U.S. and for £855 in London. If the exchange rate is £0.65 per dollar, is there any arbitrage (profit opportunity)? Explain (b). (not connected to part a). If the Euro price of one Canadian dollar was 0.770 in 2003 and the exchange rate adjusted to 1.176 Canadian dollar per Euro in 2004, did the Euro appreciate or depreciate against the Canadian dollar. Explain and show your computation.
If the exchange rate between the US Dollar ($) and the Indian Rupee (Rs.) goes from being Rs. 60/$ to Rs. 65/$, we say that the Indian Rupee has __________ relative to the US Dollar. a) appreciated b) arbitraged c) stagnated d) depreciated
b) Suppose that the current spot exchange rate of U.S. dollars for Australian dollars, Suss/As is 0.757 (i.e. $0.757 US dollar can be received for 1 Australian dollar). The price of Australian-produced goods increases by 5 percent (i.e. inflation in Australia, IPA, is 5 percent), and the U.S. price index increases by 3 percent (i.e. inflation in the United States, IPus, is 3 percent). Calculate the new spot exchange rate of U.S. dollars for Australian dollars that should result from the differences in inflation rates.
If the exchange rate between the United States dollar and the Indian rupee changes from $1=60 rupees to $1=10 rupees, ceteris paribus, one would anticipate that ___________. Group of answer choices A) India’s exports to the United States increase B) the current account in the United States’ balance of payments stays the same C)the trade deficit in the United States increases D)the United States’ imports from India increase E)the United States’ exports to India increase
Suppose the US is running a trade deficit. According to our simplified model of exchange rate determination and balance of payments, we must have had a situation of Group of answer choices A) a currency that is appreciating. B) the US importing less than it is exporting. C) none of the other options. D) GB is investing (financial investment, in this context) more in the US than the US is investing in GB. E) the US is investing (financial investment, in this context) more in Great Britain (GB) than they invested in the US.
View the data below for the exchange rate between the US dollar and the Japanese yen. How many yen could you get per dollar at the earliest date shown on the chart? Explain. How many yen could you get per dollar at the most recent date shown on the chart? Explain. Has the dollar appreciated or depreciated in value over time? Explain.
The supply of dollars in the foreign exchange market is likely to be upward sloping because as the price of a dollar (the exchange rate) rises ___________________________________. Group of answer choices A) foreigners demand more American goods because these goods have become less expensive to foreign consumers B) foreigners demand fewer non-American goods because these goods have become more expensive to foreign consumers C) Americans demand fewer foreign goods because these goods have become more expensive to American consumers D) Americans demand more foreign goods because these goods have become less expensive to American consumers
If the exchange rate between the US Dollar ($) and the Euro (E) goes from being $5/E to $6/E, we say that the US Dollar has __________ relative to the Euro. a) depreciated b) stagnated c) appreciated d) arbitraged
This is not a writing assignment, this is a multiple-choice question Which of the below statements about international exchange rates and PPPs (Purchasing Power Parity) would you consider to be INCORRECT? Group of answer choices The PPP only focuses on internationally tradable items, while the exchange rate has a broader focus and includes both internationally tradable and items that are not internationally tradable. Exchange rates include only the values of internationally tradable items, while the PPP includes both internationally tradable items as well as those which are not internationally tradable items but are used by people in different countries. The rate at which one currency can be exchanged for another is the exchange rate. If $25 can purchase a bundle of goods in the U.S. and if a comparable bundle of goods will cost 750 rubles in Russia, then the PPP between the U.S. dollar and the Russian ruble would be $25=750 Russian rubles.
Country A’s goods have become relatively more expensive for Country B’s buyers due to a change in the exchange rate between those two country’s currencies. All other things remaining constant, this could be because Country B’s currency has __________ relative to Country A’s currency. a) depreciated b) shifted c) stagnated d) appreciated
If the indirect quote for the exchange rate between the US Dollar ($) and Japanese Yen (Y) is written as 0.4/$, then what will be the direct quote written as: a) $4/Y b) $2.5/Y c) $25/Y d) $0.25/Y
Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 0.75 eurosper U.S. dollar and today the U.S. dollar is trading at 0.80 euros per U.S. dollar. Which of the twocurrencies (the U.S. dollar or the euro) has appreciated and which has depreciated today?b) Suppose that the exchange rate for the Mexican peso fell from 15 pesos per U.S. dollar to 10 pesosper U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan tobuy in the foreign exchange market?c) Suppose that the exchange rate rose from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What isthe effect of this change on the quantity of U.S. dollars that people plan to sell in the foreignexchange market?