Exam 18: B: The Balance of Payments and Exchange Rates

Assume that Switzerland and Britain have flexible exchange rates.Other things unchanged, if the price level is stable in Britain but Switzerland experiences rapid inflation:

The following table shows the balance of payments statement of Transylvania for 2013.All the figures are in billions of dollars. Refer to the above data.In a flexible exchange-rate system, the balance of payments position of Transylvania would cause the international value of its currency to depreciate.

The following table indicates the dollar price of libras, the currency used in the hypothetical nation of Libra.Assume that a system of flexible exchange rates is in place. Refer to the above table.Suppose that Libra decided to import more Canadian products.We would expect the quantity of libras:

The items in a hypothetical country's balance of payments account were: current account deficit -$100; capital account surplus +$85.The value of official reserves was:

If the exchange rate changes so that more Swiss francs are required to buy a dollar, then:

Which of the following will generate a demand for country X's currency in the foreign exchange market?

Under the gold standard:

Refer to the above diagram.The initial demand for and supply of pesos are shown by D₁ and S₁.The exchange rate will be:

Suppose interest rates fall sharply in Canada but are unchanged in Great Britain.Other things unchanged, under a system of flexible exchange rates we can expect the demand for pounds in Canada to:

The Canadian supply of pounds is:

Which of the following lists of exchange rates is arranged in proper historical order?

The expectations of speculators in Canada that the exchange rate for the euro will fall in the future will increase the supply of euros in the foreign exchange market and decrease the exchange rate for the euros.

In saying that the present system of flexible exchange rates is managed we mean that: