Preview

Exchange Rate Determination Mcq

Powerful Essays
Open Document
Open Document
2868 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Exchange Rate Determination Mcq
Chapter 4

Exchange Rate Determination

1. The value of the Australian dollar (A$) today is $0.73. Yesterday, the value of the Australian dollar was $0.69. The Australian dollar _______ by _______%. A) depreciated; 5.80 B) depreciated; 4.00 C) appreciated; 5.80 D) appreciated; 4.00

ANSWER: C

SOLUTION: ($0.73 – $0.69)/$0.69 = 5.80%

2. If a currency’s spot rate market is _______, its exchange rate is likely to be _______ to a single large purchase or sale transaction. A) liquid; highly sensitive B) illiquid; insensitive C) illiquid; highly sensitive D) none of these

ANSWER: C

3. _______ is not a factor that causes currency supply and demand schedules to change. A) Relative inflation rates B) Relative interest rates C) Relative income levels D) Expectations E) All of these are factors that cause currency supply and demand schedules to change.

ANSWER: E

4. A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) a(n) _______ in Mexican demand for U.S. goods, and the Mexican peso should _______. A) increase; appreciate B) increase; depreciate C) decrease; depreciate D) decrease; appreciate

ANSWER: B

5. An increase in U.S. interest rates relative to German interest rates would likely _______ the U.S. demand for euros and _______ the supply of euros for sale. A) reduce; increase B) increase; reduce C) reduce; reduce D) increase; increase

ANSWER: A

6. Investors from Germany, the United States, and Britain frequently invest in each other based on prevailing interest rates. If British interest rates increase, German investors are likely to buy _______ dollar-denominated securities, and the euro is likely to _______ relative to the dollar. A) fewer; depreciate B) fewer; appreciate C) more;

You May Also Find These Documents Helpful

  • Good Essays

    Exam 1 Sol

    • 1358 Words
    • 5 Pages

    6. Due to a nation's weak currency, people may have to fall back on ___________.…

    • 1358 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    prob set 1

    • 629 Words
    • 3 Pages

    c.) What will this do to the demand curve? Of the available list of things in the text that causes a change in demand, which best fits here as the cause of the demand shift?…

    • 629 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    ECO 550 Midterm Exam

    • 620 Words
    • 3 Pages

    7. Using demand and supply curves for the Japanese yen based on the $/¥ price for yen, an increase in US INFLATION RATES would…

    • 620 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    to kill a mocking bird

    • 2000 Words
    • 8 Pages

    b. Explain how the change in interest rates will affect the international value of Happyland’s dollar.…

    • 2000 Words
    • 8 Pages
    Powerful Essays
  • Good Essays

    Econ 213 PS1

    • 502 Words
    • 3 Pages

    c.) What will this do to the demand curve? Of the available list of things in the text that causes a change in demand, which best fits here as the cause of the demand shift?…

    • 502 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    3. The value of a country’s currency is likely to decline as a result of…

    • 243 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    Intro to Business

    • 576 Words
    • 2 Pages

    1) First, describe in your own words the significance and differences in foreign currency exchange rates.…

    • 576 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    c) What will this do to the demand curve? Of the available list of things in the text that causes a change in demand, which best fits here as the cause of the demand shift?…

    • 505 Words
    • 4 Pages
    Satisfactory Essays
  • Good Essays

    List and explain the three reasons Adam Smith said productivity increases with specialization. Who was Adam Smith?…

    • 450 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    HST 04 07 Practice GA

    • 641 Words
    • 3 Pages

    3. A marine biologist is planning to move from Sydney, Australia, to San Francisco. She has $5,000 Australian dollars (AUD) to make the move. In the summer of 2006, the exchange rate of USD/AUD (U.S. dollars to Australian dollars) is 0.765, and the USD is rising against the AUD. If the rising dollar trend continues, and all other economic elements remain equal, will her AUD be worth more USD now or later? Explain.…

    • 641 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    b. Average household income falls from $50,000 to $43,000 I think the demand would decrease because of household budget cuts.…

    • 291 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    U7 Template

    • 360 Words
    • 7 Pages

    c) What does this imply about the relationship between the public’s desire for holding currency and the money multiplier? Which scenario will contribute more to increase in money supply?…

    • 360 Words
    • 7 Pages
    Satisfactory Essays
  • Better Essays

    The Size of financial flows into Australia The size of financial flows into Australia from investors who wish to invest in Australia and need to convert their currency into AUD will affect demand for the dollar. The level of capital inflow will be affected by the level of Australian interest rates relative to overseas interest rates as well as the level of confidence in the Australian economy. If Australia has relatively higher interest rates and stronger confidence, then this will encourage capital inflow and increase demand for the AUD. Using this theory, the Australian dollar at the present looks to be in a relatively strong position. Interest rates are beginning to rise (official interest rate has recently been risen 0.25 points to 4.5% and is expected to raise to 5.25% by September this year, with economic growth expected to be around 3.75% in 2002/03.)…

    • 1054 Words
    • 4 Pages
    Better Essays
  • Good Essays

    |Joining the Euro could ensure a stable exchange rate and provide a |The threat of peak oil will have an adverse affect on the euro…

    • 1198 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Aspen Case Study

    • 658 Words
    • 3 Pages

    The main exchange rates exposures are: British pounds, Deutsch Mark, Japanese Yen and Belgian Francs.…

    • 658 Words
    • 3 Pages
    Satisfactory Essays