Exam 11: Exchange Rates and the Balance of Payments

-Refer to the graph above to answer this question.Assume that the demand for the U.S.dollar was to shift from D1 to D2 and that exchange rates were flexible.What would result?

Which of the following statements is true?

In May of 1970,Canadian authorities abandoned their fixed exchange rate policy which had,for many years,fixed the Canadian dollar at $0.925 U.S.Within a few weeks the freely floating rate was around $0.95.Based on this information what can be deduced?

Explain who and why demands Canadian dollar in the foreign exchange market?

Which of the following could explain the change in aggregate demand from AD1 to AD2?

Why are governments often reluctant to announce that they may devalue a currency?

Suppose that,under a system of flexible exchange rates,Mexicans decide to increase their investments in Canada.What will result?

Which of the following will result from an increase in the U.S.GDP?

An American resident who receives interest on the Canadian savings bond she holds will be demanding what currency?

If foreign incomes rise,what is likely to happen to the demand for and the value of the Canadian dollar?

What is the effect of an appreciation of the Canadian dollar?

If Canada were on a fixed exchange-rate system,an increase in the demand for the Canadian dollar would result in the dollar being undervalued.

All of the following,except one,are determinants of the international demand for a nation's currency.Which is the exception?

What methods are available to a country with a fixed exchange rate wishing to correct a persistent balance of payments deficit caused by its currency being overvalued.

Which of the following groups has a demand for Canadian dollars?

The supply of Canadian dollars on foreign exchange markets will increase in all of the following cases except one.Which is the exception?

What is the result of the exchange rate changing so that fewer French francs are needed to buy a Canadian dollar?

The following table contains hypothetical data for Canada's balance of payments in a particular year. -Refer to the information above to answer this question.What is the state of Canada's balance of payments (balance of current and capital accounts)?

All of the following,except one,will be the result of an increase in the demand for the Canadian dollar on the foreign exchange markets.Which is the exception?

If the balance of trade is $50 million and the balance of the capital account is - $40 million,what is the balance of the current account?