Exam 34: International Finance

The higher the U.S. dollar price per Mexican peso, the __________ Mexican goods are for Americans and the __________ Mexican goods Americans will buy; thus __________ pesos will be demanded.

A "revaluation" occurs when

When the equilibrium dollar price of a foreign currency decreases due to changes in demand for or supply of the foreign currency, the foreign currency

Those economists who argue that the European Union is not a true optimal currency area cite _______________ and __________________ as justifications for this position.

Describe the type of international monetary system that is currently in use. What advantages do proponents of this type of system cite in support of its use? What disadvantages do its opponents cite?

The purchasing power parity theory predicts that changes in the relative price levels of two countries will affect the exchange rate in such a way that

The current international monetary system is best described as a

Exhibit 34-5 U.S. $ Equivalent Foreign Currency per U.S. $ ​ ​ -Refer to Exhibit 34-5. Based on the information provided in this table, between Monday and Tuesday, the U.S. dollar ____________ against the Mexican peso and the peso _____________ against the U.S. dollar.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.008 = 1 yen, but currently the exchange rate is $0.007 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________, and the dollar will __________.

If the equilibrium exchange rate between U.S. dollars and Japanese yen is $0.01 = 1 yen, but currently the exchange rate is $0.009 = 1 yen, then with flexible exchange rates the dollar price of a yen will __________ and the yen will __________.

Suppose the current exchange rate between the U.S. dollar and the Mexican peso is $0.12 = 1 peso. Furthermore, suppose the price level in Mexico rises 25 percent while the U.S. price level remains constant. According to the purchasing power parity theory, what will be the equilibrium exchange rate?

Suppose that prices in Japan increase by 8 percent while prices in the United States remain stable. We would expect that the result would be that in the foreign exchange market ___________________________, ​ceteris paribus​.

If the income of U.S. citizens falls relative to the income of Japanese citizens, the dollar will __________ in terms of the yen, and the yen will __________ in terms of the dollar.

Under a fixed exchange rate system, if the dollar price of Mexican pesos is above its equilibrium level, the peso is referred to as overvalued and the dollar is necessarily undervalued.

The U.S. dollar currently serves as the "unit of account" of major global products.

Suppose that the exchange rate between the U.S. dollar and the Mexican peso starts out at $0.11 per peso. If the exchange rate then changes to $0.13 per peso, there will be a(n) __________ in the quantity demanded of dollars by Mexicans, and therefore there will be a(n) __________ in the quantity supplied of pesos to the foreign exchange market.

An American computer is priced at $1,350. If the exchange rate between the U.S. dollar and the Mexican peso is $0.057 = 1 peso, approximately how many pesos would a Mexican buyer pay for the computer?

The more dollars that must be given up to buy one British pound, the __________ American goods are for the British and the __________ American goods the British will buy; thus __________ dollars will be demanded.

The foreign exchange market is the market where

If inflation in the United States rises relative to the inflation rate in Mexico, the dollar will __________ in terms of the peso and the peso will __________ in terms of the dollar.