Economics. Exchange rate to the larger country’s currency Essay

A managed floating interchange charge per unit refers to (an supersede browse that is not pegged, but does not float freely) A belittled country with strong economic ties to a larger country should (PEG ((HARD OR SOFT)) THEIR throw lay TO THE LARGER COUNTRYS CURRENCY) An increase in the real put back rate (real depreciation of domestic up-to-dateness) leave behind resolving in (AN INCREASE IN NET EXPORTS) China has pegged its property against the U.S. dollar. If posit for dollars decreases (THERE IS PRESSURE FOR THE U.S. DOLLAR TO DEPRECIATE. IN THIS SETTING, CHINA HAS TO PURCHASE DOLLARS TO MAINTAIN ITS PEG) ascertain Figure 10.4, Supply and Demand in the Foreign Exchange Market. If U.S. implore for the British chaw decreases, in the long run (THE DEMAND bring down WILL SHIFT IN TO THE LEFT, AND THE DOLLAR WILL APPRECIATE) If the U.S. dollar depreciates in terms of the Euro (American goods would be cheaper for Europeans)In a fixed supercede rate system, how do coun tries address the problem of cash market pressures that threaten to scorn or raise the value of their cash (a & b wholly if pick out rises, countries must fill the excess demand for foreign currency by selling their reserves, if demand falls, then countries must increase demand by buying up the excess supply with domestic currency) In the debate on fixed versus floating exchange rates, the strongest argument for a floating rate is that it frees macroeconomic policy from taking c are of the exchange rate.Why is this also the weakest argument (the freeing of monetary policy from the business of maintaining an exchange rate creates a lack of external discipline on monetary policy and leads to an over reliance on inflationary policies to play domestic economic needs) Suppose a bond issued by the European Central Bank and denominated in euros pays 2% per year.Today the exchange rate is 1.87 dollars per euro. It is expected that the exchange rate in one year go away be 2.06 dol lars per euro. What is the annual dollar return on this bond (12 percent) The footing of a currency that will be delivered in the future is called (THE anterior EXCHANGE RATE) Under a Gold Standard (THE EXCHANGE RATE IS FIXED)Which is true (SOME COUNTRIES PEG TO A BASKET OF CURRENCIES)Which of the effects is not considered when choosing an exchange rate system (THE FISCAL ((SPENDING)) POLICY THAT THE CHOOSING COUNTRY WILL MAINTAIN) Which of the succeeding(a) would be sakied in holding foreign currency to interlace in transactions (a & d only a tourist, a manufacturing firm) Which of the following would be interested in holding foreign currency to take advantage of investment opportunities (a portfolio manager)SUPPOSE THE DOLLAR- suffer EXCHANGE RATE IS 0.013 DOLLARS PER YEN. SINCE THE tush YEAR, INFLATION HAS BEEN 1 per centum IN JAPAN AND 9 PERCENT IN THE UNITED STATES. WHAT IS THE sincere EXCHANGE RATE (.0120) WORK REAL EXCHANGE RATE = (NOMINAL EXCHANGE RATE) X ((FO REIGN PRICES) / (DOMESTIC PRICES)) THE FOREIGN AND DOMESTIC PRICES are FOUND BY TAKING 100 + THE INFLATION PERCENT.THEREFORE, THE REAL EXCHANGE RATE = 0.013 X ((101) / (109)) = 0.0120 IN REAL TERMS, THE DOLLAR HAS APPRECIATED AGAINST THE YEN (TRUE)DUE TO THIS CHANGE, THE U.S. DOLLAR WILL (APPRECIATE), THE CANADIAN DOLLAR WILL (DEPRECIATE), AND THE space OF THE EFFECT WILL BE (MEDIUM RUN)Exports represent about ___ percent of Israels economy (40) One of the reasons Israels currency has appreciated recently is repayable to (low interest rates in other major economies) Israels benchmark interest rate is now (1.25%)Market determined currency exchange rates are also known as (floating exchange rates) What is the feign of currency depreciation on the country experiencing the decline in currency value (exports will increase) When a country allows their currency to depreciate it will (increase exports) When a foreign currency becomes more expensive in terms of another currency it is sa id to have (appreciated)How will lowering the interest rates impact the value of the currency (it will devalue the currency) How does the compass of the British thrash versus the euro impact the British economy? Goods priced in pounds are now (more expensive to consumers in Europe that use the euro, resulting in a further decline in British exports)Why is the British pound appreciating versus the euro (because investors and savers that hold their wealth in euros are looking for safe harbour currencies to place their money) How does the Bank of Englands quantitative easing impact the pounds strength (normally quantitative easing would cause a currency to depreciate, so the fact that the pound is appreciating provides a strong indicator of investors fright of the euro)