Exam 21: Exchange Rates and Financial Links Between Countries

A permanent shift in the foreign exchange market supply and demand curves such that the fixed exchange rate is no longer an equilibrium rate is referred to as:

How many dollars do you need to buy a Swedish Kronor (SEK) when the exchange rate is $1 = 6.429 SEK?

The World Bank obtains the funds it lends by:

The figure given below depicts the demand and supply of Brazilian reals in the foreign exchange market. Assume that the market operates under a flexible exchange rate regime. Figure 21.1 In the figure: D₁ and D₂: Demand for Brazilian reals S₁ and S₂: Supply of Brazilian reals -Refer to Figure 21.1. If the initial equilibrium exchange rate is 6 pesos per real, then other things equal, a decrease in the number of Brazilian tourists to Mexico would:

Which of the following was the reserve currency under the gold exchange standard?

Suppose the official gold value of the Brazilian real changes from 527 reals per ounce to 508 reals per ounce. We can then say that:

An increase in the demand for rubles causes the ruble to appreciate.

Suppose the official gold value of the Brazilian real changes from 457 reals per ounce to 528 reals per ounce. We can then say that:

Which of the following exchange rate systems have a legislative commitment to exchange domestic currency for a specified foreign currency at a fixed exchange rate?

Suppose a U.S. investor buys a Canadian government bond with a face value of Canadian dollar (CAD) 100 and an annual yield of 8.8 percent. Which of the following statements is true?

Suppose a Canadian investor buys a one-year U.S. government bond that pays 7 percent interest. If the U.S. dollar appreciates 4 percent against the Canadian dollar during the year, what must be the yield on a comparable Canadian government bond for interest rate parity to hold?

No currency ever appreciated or depreciated under the Bretton Woods system as it was based on a system of fixed exchange rates.

Assume that a British investor buys a one-year U.S. Treasury bill that pays 6 percent annual interest. Given a yield of 4 percent on a comparable British Treasury bill, the U.S. dollar must depreciate 2 percent against the British pound during the year for interest rate parity to hold.

Suppose a hefty rise in the demand for Mexican pesos create a chronic shortage of this currency in the foreign exchange market. Which of the following steps should be adopted by the Mexican government to eliminate this shortage?

Suppose a U.S. citizen purchases a one-year Norwegian bond that yields 10 percent interest. Between the purchase date and the maturity date, the exchange rate changes from $\$ 1.00 = \mathrm { NKr } 7.0$ to $\$ 1.00 = \mathrm { Nkr6 } .3$ How much was initially invested in the bond if the dollar value of the proceeds at maturity is $3,500? (roundoff up to the nearest whole number)

The exchange rate that is established in the absence of foreign exchange market intervention by the government is known as a(n):

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars. Figure 21.2 -Refer to Figure 21.2. Suppose S1 is the initial supply curve and the British demand for U.S. manufactured computers decreases. Then, with flexible exchange rates:

If the official gold value of the Australian dollar changes from 470 Australian dollars per ounce to 493 Australian dollars per ounce, we can say that the Australian dollar has appreciated in value.

Suppose purchasing power parity exists in the car stereo market in the United States and Australia. If a car stereo costs $230 in the United States and the exchange rate is $1 = $AUD1.67, the same car stereo may be purchased in Australia for approximately:

A fixed exchange rate can be an equilibrium rate even if there is a permanent shift in the foreign exchange market supply and demand curves.