Exam 9: The Determination of Exchange Rates

The central bank in the United States is the ________.

Which type of exchange rate arrangement is based on supply and demand?

Although central banks are responsible for foreign-exchange policy,they have no power to intervene in exchange rate markets.

Central bank reserve assets are kept in three major forms: foreign-exchange reserves,silver,and gold.

What led to the Greek financial crisis of 2010? What have been the roles of the IMF and European Central Bank in the crisis? What challenges with the euro facilitated the crisis?

According to the purchasing power parity theory,a change in relative interest rates between two countries must cause a change in exchange rates.

Country X has a floating rate for luxury goods and a lower rate for semi-manufactured goods.Which of the following is most likely used by Country X?

The Big Mac Index suggests that exchange rates should leave Big Mac hamburgers costing the same in the U.S.as abroad.

The Japanese yen is an example of a soft currency.

The major objective of the European Central Bank is to control taxes as a means of deficit spending.

A technical forecaster is also known as a ________.

What are the main arguments for and against Africa developing a common currency like the EU?

Dollarization of a currency occurs when a country takes all of its own currency out of circulation and replaces it with U.S.dollars.

An MNE would most likely benefit from converting local currency into its home-country currency when exchange rates are most favorable so it can maximize its return.

________ is a form of locking the value of a country's currency onto another currency.

Hard currencies are usually ________.

It is easier to predict the ________ of a change than the ________ of a change in exchange rates.

Fundamental forecasters assume that if current exchange rates reflect all facts in the market,then under similar circumstances,future rates will follow the same patterns.

Which of the following is used as an illustration of the PPP theory for estimating exchange rates?

How do exchange rate changes affect a company's marketing,production,and financial decisions? What predictors should a manager monitor to forecast exchange rate changes?