Exam 15: The International Financial System

Figure 15.5 Alt text for Figure 15.5: In figure 15.5, a graph illustrates the quantity of yuan traded against the exchange rate. Long description for Figure 15.5: The x-axis is labelled, quantity of yuan traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the yuan.Supply curve S, is a straight line which slopes up from the bottom left corner to the top right corner.Demand curve D, is a straight line which slopes down from the top left corner to the bottom right corner.The curves intersect at point A, (600, 0.13).Point A, and unmarked points (800, 0.11), (500, $0.14), (700, $0.14), and (400, 0.11)are all connected to their corresponding values on the x and y-axes with dotted lines. -Refer to Figure 15.5.Suppose the pegged exchange rate is $0.11/yuan.Because of safety concerns and numerous product recalls, U.S.consumers lower their demand for Chinese products.Using the figure above, this would

Purchasing power parity is the theory that, in the long run, exchange rates move to equalize

What factors are most important for determining exchange rate fluctuations in the long run?

All of the following are considered among the four most important determinants in explaining exchange rate fluctuations in the long run, except

In Canada today, the Bank of Canada will give you ________ in exchange for $1.

If the exchange rate between the Canadian dollar and the Indian rupee (rupees per dollar)is greater than the relative purchasing power between the two countries, which of the following would be true?

Figure 15.7 Alt text for Figure 15.7: In figure 15.7, a graph illustrates the quantity of dollars traded against the exchange rate. Long description for Figure 15.7: The x-axis is labelled, quantity of dollars traded per day.The y-axis is labelled, exchange rate, peso to Canadian dollar, with values 1.00 and 1.05 dollars marked.A straight line supply curve slopes up from the bottom left corner to the top right corner.2 parallel straight line demand curves, D1 and D2 slope down form the top left corner to the bottom right corner.Curve D2 is plotted to the left of curve D1.The change from curve D1 to curve D2 is indicated by a left pointing arrow.Curve S intersects curve D1 at a point with a y-axis value of 13.5.Curve S intersects curve D2 at a point with a y-axis value of 13.00.Both points of intersections are connected to their corresponding y-axis values with dotted lines.The difference between the y-axis values is indicated with a down pointing arrow. -Refer to Figure 15.7.Which of the following would cause the change depicted in the figure above?

If the GDP deflator in Canada is 114, and the GDP deflator in Ukraine is 142, which of the following changes would the theory of purchasing power parity predict? (The Ukrainian currency is the hryvnia.)

In Canada today, how much gold will the Bank of Canada give you in exchange for $1?

What three real-world complications keep purchasing power parity from being a complete explanation of exchange rate fluctuations in the long run? Explain.

When the value of a currency is determined ________, the exchange rate system is defined as a floating exchange rate system.

If the average productivity of Canadian firms is rising more quickly than the average productivity of Indian firms, which of the following would you expect to see? (India's currency is the rupee.)

In what year was the Bretton Woods system of currency exchange set up?

Figure 15.10 Alt text for Figure 15.10: In figure 15.10, a graph illustrates the quantity of yuan traded against the exchange rate. Long description for Figure 15.10: The x-axis is labelled, quantity of yuan traded in millions per day.The y-axis is labelled, exchange rate, Canadian dollar against the yuan.Supply curve S, is a straight line which slopes up from the bottom left corner to the top right corner.Demand curve D, is a straight line which slopes down from the top left corner to the bottom right corner.The curves intersect at point A, (600, 0.13).Point A, and unmarked points (800, 0.11), (500, $0.14), (700, $0.14), and (400, 0.11)are all connected to their corresponding values on the x and y-axes with dotted lines. -Refer to Figure 15.10.Suppose the pegged exchange rate is $0.14/yuan and Canadian consumers increase their demand for Chinese products.Using the figure above, this would

Purchasing power parity is the theory that, in the long run, exchange rates should be at a level such that equivalent amounts of any country's currency

Because the value of the euro is determined by factors that affect the entire eurozone, during the recession of 2007-2009, individual countries using the euro

If the purchasing power of a Canadian dollar is less than the purchasing power of the euro, purchasing power parity would predict that

Why would the Chinese government want the yuan to worth less than its market determined value?

What are the three main exchange rate systems, and how do they operate?

Before 1980, most Canadian corporations raised funds