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When the U.S. price level increases but the nominal exchange rate remains the same, the real exchange rate will _____.
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- 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, increasedCountries that choose to pursue a fixed exchange rate have ____ flexibility to pursue monetary policies in line with domestic goals. More or lesswhen the exchange rate for the British pound changes from $1.60 per pound to $1.40 per pound, then, holding everything else constant, the pound has __________, American wheat sold in Britain becomes _________ expensive, and British cars sold in the United States become __________ expensive. depreciated, less, less depreciated, more, less appreciated, more, less appreciated, more, more depreciated, more, more appreciated, less, more depreciated, less, more
- A small economy country whose GDP is heavily dependent on trade with the United States could use a(n) ________ exchange rate regime to minimize the risk to their economy that could arise due to unfavorable changes in the exchange rate.Would a domestic period of very high inflation make it easier or more difficult for a country to maintain a pegged exchange rate? Explain carefully.We noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was 1 pound equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?
- Consider that Britain is trying to maintain a fixed exchange rate with respect to the U.S. dollar. However, the present situation in the foreign exchange market is conducive for the British pound to appreciate with respect to the U.S. dollar. Which of the following interventions is most likely in this situation? The government of Britain should sell pounds and buy dollars. The government of Britain should do nothing, as a fixed rate cannot change. The government of Britain should buy pounds and sell dollars. The government of Britain should decrease the country's money supply.U.S. consumer spending reached record highs in 2021 coming out from the covid-19 slump. It is expected that 15% of incomes is spent on imported goods and services. How could this affect exchange rate of the U.S. dollar against our major trading partnerSuppose that yesterday, the U.S. dollar-Japanese yen exchange rate was $1=¥0.553546. The price of one Japanese yen in terms of a U.S. dollar was ___ . Suppose that today the U.S. dollar-Japanese yen exchange rate falls to $1=¥0.533585 for one dollar. This means that between yesterday and today, the U.S. dollar has ___ against the Japanese yen. The price of a Mexican peso in terms of the U.S. dollar is now ___ .
- Suppose the U.S.-EU exchange rate is $1.15 per Euro, the U.S. has 5% inflation, and the EU has 10% inflation. Under these conditions the real U.S.-EU exchange rate, rounded to the nearest cent, is approximately: $1.20 per Euro $1.10 per Euro $1.30 per Euro $1.09 per EuroIf expected inflation drops in Europe, so that interestrates fall there, what will happen to the exchange rateon the U.S. dollar?If a country has a floating exchange rate, then will a rise in the exchange rate be bad or good for importers?