Exam 19: The International Financial System

All of the following explain why purchasing power parity does not completely explain long-run fluctuations in exchange rates except

An increase in the value of the U.S.dollar relative to the Canadian dollar would be ________ for Canadian owners of U.S.houses who wish to sell those houses,and ________ for Canadian manufacturers operating factories in the United States that export their products back to Canada.

Airbus is a passenger aircraft manufacturer based in Europe,but like the rest of the global aerospace industry,conducts is business in U.S.dollars.Suppose Airbus sells an aircraft to Air France,and Air France pays Airbus in U.S.dollars. If the value of the U.S.dollar falls relative to the euro,Airbus's profits in Europe will ________ because it will receive ________ when it converts the dollars it earns from the sale into euros.

If the U.S.government removes tariffs it had placed on imports from countries that have been accused of deliberately undervaluing their currencies,the price of these imports will ________ and the demand for the undervalued currency will ________.

The Bretton Woods system was established in 1944 and remained in place until the early 1970s.

Actions taken by investors who sell a country's currency in anticipation of buying it back later at a lower price is known as

Figure 30-3 -Refer to Figure 30-3. At what level should the Indian government peg its currency to the dollar to make U.S.imports cheaper in India?

Among countries that purchased U.S.stocks and bonds in 2010,China was the biggest customer,accounting for 49 percent of all purchases.

European governments removed many restrictions on flows of capital into and out of Europe in the ________. This policy increased both U.S.investment in European stocks and bonds and European investment in U.S.stocks and bonds.

International flows of capital increase both efficiency and growth in countries around the world.

Foreign purchases of stocks and bonds issued by U.S.corporations ________ between 1995 and 2007 and ________ in 2010.

A Big Mac costs $4.07 in the United States and 8.63 zlotys in Poland.If the exchange rate is 3 zlotys per dollar,what is the dollar cost of a Big Mac in Poland?

Under the Bretton Woods system,a fixed exchange rate supported by central banks was known as a ________ exchange rate.

What is the connection between the gold held at the Fort Knox Bullion Depository in Kentucky and the U.S.money supply?

Which of the following statements about capital markets is true?

Figure 30-7 -A persistent shortage of yen at a given fixed exchange rate (in dollars per yen)is evidence that the yen is ________ versus the dollar. This shortage can be reduced or eliminated through a ________ of the yen.

Firms in Thailand that had ________ while the baht was pegged to the dollar faced interest payments that were higher than they had planned once the Thai government abandoned the peg because the baht had been pegged ________ the equilibrium exchange rate for the baht.

Pegging a country's exchange rate to the dollar can be advantageous in all of the following situations except

Describe the four determinants of exchange rates in the long run.

Suppose the U.S.dollar is backed by one-sixth of an ounce of gold and the British pound is backed by one-third of an ounce of gold. The exchange rate between the U.S.dollar and the British pound equals ________ per pound.