Exam 12: Exchange-Rate Determination

Concerning exchange rate forecasting,____ relies on econometric models which are based on macroeconomic variables likely to affect currency values.

Although the law of one price predicts that identical goods should cost the same in all nations,transportation costs and tariffs tend to prevent this prediction from actually occurring.

In a free market,the equilibrium exchange rate occurs at the point where the quantity demanded of a foreign currency equals the quantity of that currency supplied.

Which example of market expectations causes the dollar to appreciate against the yen--expectations that the U.S.economy will have:

Given an efficient foreign exchange market,the spot rate is the rational approximation of the markets expectation of the forward rate that will exist at the end of the forward period.

The U.S.demand for pesos would shift to the right if there occurred a (an):

Exchange rates are determined by the unregulated forces of supply and demand for foreign currencies as long as central banks do not intervene in the foreign exchange markets.

If wheat costs $4 per bushel in the United States and 2 pounds per bushel in Great Britain,then in the presence of purchasing-power parity the exchange rate should be:

Which example of market expectations causes the dollar to depreciate against the yen--expectations that the U.S.economy will have:

According to exchange-rate overshooting,an appreciation of the Australian dollar is likely to be greater over a long time period than over a short time period.

The figure below illustrates the supply and demand schedules of Swiss francs under a system of floating exchange rates. Figure 12.2.The Market for Swiss Francs -Refer to Figure 12.2.If Swiss manufacturing costs increase relative to those of the United States,there would occur an increase in the supply of francs and an appreciation in the dollar's exchange value.

The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates. Figure 12.1 The Market for Francs -Refer to Figure 12.1.Should Swiss labor productivity rise,leading to a decrease in Swiss manufacturing costs,there would occur a (an):

When the price of foreign currency (i.e.,the exchange rate)is above the equilibrium level:

In a free market,what determines exchange rates in the long run and the short run?

Which theory of exchange-rate determination best views the foreign exchange market as being similar to a stock exchange where future expectations are important and prices are volatile?

The figure below illustrates the supply and demand schedules of Swiss francs in a market of freely-floating exchange rates. Figure 12.1 The Market for Francs -Refer to Figure 12.1.Should the U.S.price level rise relative to the Swiss price level,there would occur a (an):

A forward premium on the British pound serves as a rough benchmark of the expected rate of appreciation in the pound's spot rate.

If Japan realizes technological improvements in the production of automobiles,which lowers its production costs relative to foreign producers,Japanese exports will rise and the yen's exchange value will appreciate under a system of floating exchange rates.

The high foreign exchange value of the U.S.dollar in the early 1980s can best be explained by:

That identical goods should cost the same in all nations,assuming it is costless to ship goods between nations and there are no barriers to trade,is a reflection of the: