Exam 6: Government Influence on Exchange Rates

An example of indirect intervention by the Bank of Japan would be for the Bank of Japan to use interest rates to increase the value of the yen vs. the dollar.

The interest rate of a country with a currency board:

If a U.S. firm plans to frequently purchases goods from Hong Kong over the next several years, it does not have to worry about exchange rate risk.

Using indirect intervention, the Fed attempts to affect the dollar's value indirectly by influencing the factors that determine it, such as interest rates.

All European countries now use the euro as their currency.

The euro is the currency:

A country with fixed exchange rates oFten faces constraints on growth.

The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency depreciates against the currency of Country Z. It is likely that Country X will export ____ to Country Z and import ____ from Country Z.

In a sterilized exchange rate arrangement, a country's home currency value is pegged to a foreign currency or to some unit of account.

Which of the following countries have not adopted the euro?

Which of the following is not a reason for devaluation of a currency?

Assuming no credit risk, the interest rates among countries in the eurozone should be similar.

Under a fixed exchange rate system, U.S. inflation would have a greater impact on inflation in other countries than it would under a freely floating exchange rate system.

Countries that have adopted the euro must agree on a single ____ policy.

Under the system known as the "dirty" float, official boundaries for the exchange rate exist, but they are wider than they are under a fixed exchange rate system.

The Smithsonian Agreement was an agreement to allow currencies of major countries to float without any barriers.

If a speculator expects that the Fed will intervene by exchanging euros for U.S. dollars, she would most likely ____ to capitalize on this intervention.

The European Central Bank is responsible for monetary policy in all countries that adopted the euro as its currency.

Under the system known as the "dirty" float, official boundaries for the exchange rate exist, but they are wider than they are under a fixed exchange rate system.

Currency devaluation can boost a country's exports, but currency revaluation can increase foreign competition.