Exam 30: The International Financial System

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 ________.

If a country's currency is "pegged" to the dollar, its exchange rate is

If the rate of productivity growth in the United States exceeds the rate of productivity growth in Great Britain we would expect the U.S. dollar to depreciate in value against the British pound.

Under the Bretton Woods system, U.S. dollars were redeemable for ________ only if the dollars were presented by a foreign central bank.

If relative purchasing power between the United States and Argentina is 3.22 pesos per dollar, under which circumstances would we say that the dollar is "overvalued"?

Foreign purchases of stocks and bonds issued by U.S. corporations ________ between 1995 and 2007 and ________ in 2012.

What explains the appreciation of the Japanese yen relative to the U.S. dollar from 1970 to the early 1990s?

Figure 30-7 -Refer to Figure 30-7. Which of the following is true?

What do reports that the dollar is "undervalued" mean? How will foreign exchange markets respond to this information? Support your answer graphically.

In Thailand in the late 1990s, there was pressure for the value of the baht to decline as foreign investors began to

Table 30-1 Source: "The Big Mac Index," Economist, July 11, 2013. -Refer to Table 30-1. Fill in the missing values in the above table. Assume the Big Mac is selling for $4.56 in the United States. Explain whether the U.S. dollar is overvalued or undervalued relative to each of the other currencies and predict what will happen in the future to each exchange rate.

Figure 30-5 -Refer to Figure 30-5. Suppose the pegged exchange rate is $0.14/yuan and U.S. consumers increase their demand for Chinese products. Using the figure above, this would

What is the difference between a devaluation and a revaluation of a currency?

One reason that Iceland recovered from the financial crisis which began in 2007 more quickly than did countries like Greece, Spain, and Italy is that Iceland does not use the euro, and the value of its currency was able to ________ versus the euro, which increased its ________.

The Bretton Woods system confronted severe problems in the 1960s, problems which included

Thailand's experience with pegging the baht to the dollar failed because the baht was ________ relative to the dollar, and China's experience with pegging the yuan to the dollar has run into difficulties because the yuan has been ________ relative to the dollar.

If the GDP deflator in the United States is 114, and the GDP deflator in Ukraine is 142, which of the following exchange rates would the theory of purchasing power parity predict in the long run? (The Ukrainian currency is the hryvnia.)

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

How were countries whose industries competed with Chinese industry affected by a yuan that was pegged to the dollar?

South Korea, Indonesia, Malaysia, and Thailand all pegged their currencies to the dollar at one point in time. Because some of these currencies were overvalued at the pegged rate, speculators anticipated these countries would abandon the peg and speculators began selling those currencies. Explain how this speculation would affect the ability of a country to maintain a pegged exchange rate.