Exam 30: International Finance

When the price of a currency is higher, the quantity of this currency demanded is lower.

Explain why and how China has kept its Chinese renminbi undervalued? What would be the potential problem for this policy?

In the foreign exchange market, who demands U.S. dollars and who supplies U.S. dollars? Explain.

If a country has a fixed exchange rate,

Suppose the policymakers believe their country's currency is overvalued, they should apply a policy of

Suppose a central bank attempts to peg its country's currency to the dollar. Now interest rates in the United States increase. To maintain the fixed exchange rate, that central bank can

A decrease in the value of a domestic currency in term of another currency is known as

A government's policy to keep its currency undervalued by increasing its foreign currency reserves will eventually lead to deflation.

All else equal, if the exchange rate of the dollar against the euro increases,

A depreciation of a country's currency means

One way for a government to keep its currency undervalued over time is to increase its holdings of foreign currency reserves.

One major reason for the countries that have joined the EU but not the EMU is that those countries

Suppose the interest rates in both Japan and the United States rise, but the Japanese interest rate rises more than the U.S. interest rate does. As a result, international investors will

An appreciation of a country's currency means

Which of the following is a rationale for countries joining the Eurozone?

Suppose that yesterday one dollar was exchanged for 1.2 euros. Today one dollar is exchanged for 1.3 euros. We know that the euro

In the case of Italy, the benefit of a fixed exchange rate with the European Union outweighed the loss of a separate monetary policy.

All else equal, a rightward shift of the demand curve of the market for the U.S. dollar would result in

If a central bank devaluates its currency, then

Devaluation or revaluation by governments