Exam 30: The International Financial System

In order to support an undervalued euro,the European Central Bank must ________ dollars.Over time,this action will cause the rate of inflation in the EU to ________.

If the equilibrium exchange rate exceeds the par exchange rate in the market for pounds,the pound is overvalued.

Increasing a fixed exchange rate is called a revaluation.

Countries that abandoned the gold standard early in the Great Depression suffered an average decline in production of 3 percent between 1929 and 1934.Countries that stayed on the gold standard until 1933 or later suffered an average decline in production of

Fluctuating exchange rates can alter a multinational firm's profits and losses.German company Bayer produces products in Germany and sells them in the United States.If the dollar depreciates against the euro,then Bayer's sales in the United States should ________ because it will take ________ U.S.dollars to purchase the German-made products.

European governments removed many restrictions on flows of capital into and out of Europe in the ________.This policy increased both U.S.investment in European stocks and bonds and European investment in U.S.stocks and bonds.

In 2014,foreign purchases of U.S.corporate stocks and bonds

If interest rates in the United States rise

The exchange rate system agreed to in 1944,in which the U.S.government agreed to buy or sell gold at a fixed price of $35 per ounce,is referred to as

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

Members of the European Union decided to adopt a single currency by what year?

Fluctuating exchange rates can alter a multinational firm's profits and losses.The U.S.automobile manufacturer Tesla produces vehicles in the United States and sells them in Norway.(Norway is Tesla's largest overseas market. )If the dollar appreciates against the Norwegian krone,then Tesla's revenues from these operations should ________ and its profits from these operations should ________.

Both countries involved in a pegging of currency must agree to the terms of the pegging.

How will the exchange rate (foreign currency per dollar)respond to an increase in the relative rate of productivity growth in the United States in the long run?

Figure 30-11 -Refer to Figure 30-11.The graph above depicts supply and demand for British pounds during a trading day,where the quantity is millions of pounds.In order to support a fixed exchange rate of $2.00 per pound,the British central bank must

What does it mean when one currency is "pegged" against another currency?

A Big Mac costs $4.00 in the United States and 9.00 reals in Brazil.If the exchange rate is 2 reals per dollar,what is the dollar cost of a Big Mac in Brazil?

The "Big Mac Theory of Exchange Rates" tests the accuracy of purchasing power parity theory.In July 2015,The Economist reported that the average price of a Big Mac in the United States was $4.79.In India,the average price of a Big Mac at that time was 116.25 rupees.What is the "implied exchange rate" between the yen and the dollar?

China began pegging its currency,the yuan,to the dollar in 1994.Because the yuan was ________ at the pegged exchange rate,the level of Chinese exports remained ________ than they would have been if the exchange rate were allowed to float freely.

A persistent surplus of pounds at a given fixed exchange rate (in dollars per pound)is evidence that the pound is ________ versus the dollar.This surplus can be reduced or eliminated through a ________ of the pound.