Exam 17: International Finance

Foreign currencies can be bought and sold

Figure 17.1 Supply and Demand Curves for the Swiss Franc -Refer to Figure 17.1. Suppose the exchange rate is $0.30 per franc. Free-market forces would lead to a(n) ______ of the dollar against the franc and a(n) ______ in U.S. international competitiveness.

A depreciation of the dollar refers to a fall in the dollar price of a foreign currency.

Figure 17.1 Supply and Demand Curves for the Swiss Franc -Refer to Figure 17.1. At the equilibrium exchange rate of ______ per franc, ______ francs will be purchased at a total dollar cost of ______.

If the Mexican peso is appreciating in a floating exchange rate system, then in world markets, Mexican goods become

Assume that the U.S. faces an 8 percent inflation rate while no (0%) inflation exists in Japan. With floating exchange rates, we would expect the dollar to

Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates -Refer to Figure 17.3. If interest rates in the U.S. rise relative to interest rates in Switzerland, then we would expect a(n)

Foreign exchange market transactions usually involve movements in electronic balances, rather than actual currencies changing hands.

Capital transactions in the balance of payments include all international purchases or sales of assets such as real estate, corporate stocks and bonds, and government securities.

With floating exchange rates, the dollar will appreciate against the Mexican peso if the price level in the U.S. rises relative to the price level in Mexico.

If the dollar price of the pound is $2 = 1 pound, then the pound price of the dollar is 0.5 pounds = $1.

______ in the balance of payments include all international purchases or sales of assets such as real estate, corporate stocks and bonds, and government securities.

Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates -Refer to Figure 17.3. If Switzerland experienced a disastrous grain harvest, leading to additional grain imports from the United States, then there would be an increase in the

Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates -Refer to Figure 17.3. If Swiss labor productivity rises, leading to a decrease in Swiss manufacturing costs, then there would be a(n)

When the dollar price of the pound increases, the dollar appreciates against the pound.

Figure 17.2 The Market for Swiss Francs -Refer to Figure 17.2. A shift in the demand for francs from D₀ to D₁ or a shift in the supply of francs from S₀ to S_2, would result in a(n)

Table 17.2 Foreign Exchange Quotations U.S. Dollar Equivalent Currency Per U.S. Dollar British Pound 1.4270 1.4390 0.7008 0.6949 30-day Forward 1.4211 1.4333 0.7037 0.6977 60-day Forward 1.4090 1.4220 0.7097 0.7032 180-day Forward 1.3930 1.4070 0.7179 0.7107 -Refer to Table 17.2. Based on the change in the dollar's exchange value from Monday to Tuesday, we could expect to see

Table 17.1 U.S. International Transactions Transaction Amount (billions of dollars) Merchandise imports 110 Services, net 15 Unilateral transfers, net -20 U.S. private assets abroad -50 Merchandise exports 115 Investment income, net 10 Foreign private assets in the U.S. 25 -Referring to Table 17.1, the merchandise trade balance shows a

Figure 17.3 The Swiss Franc Under a System of Floating Exchange Rates -Refer to Figure 17.3. If the U.S. price level rises relative to the Swiss price level, then we would expect a(n)

Currency appreciation means that it takes fewer units of a nation's currency to purchase a unit of some foreign currency.