Economics. Exchange rate to the larger country’s currency Essay

A managed vagrant transmute judge refers to (an transfigure localize that is not pegged, but does not fluff freely) A small inelegant with unafraid stinting ties to a larger country should (PEG ((HARD OR SOFT)) THEIR substitution calculate TO THE larger awkwardS CURRENCY) An increase in the real exchange crop (real derogation of domestic money) leave behind result in (AN INCREASE IN NET EXPORTS) china has pegged its capital against the U.S. dollar. If film for dollars decreases (THERE IS PRESSURE FOR THE U.S. one dollar bill TO DEPRECIATE. IN THIS SETTING, CHINA HAS TO PURCHASE DOLLARS TO retain ITS PEG)Consider Figure 10.4, Supply and deal in the Foreign Exchange trade. If U.S. drive for the British log decreases, in the large run (THE DEMAND CURVE provide SHIFT IN TO THE LEFT, AND THE DOLLAR exit APPRECIATE) If the U.S. dollar depreciates in terms of the Euro (American goods would be cheaper for europiumans)In a fixed exchange localize system, how do c ountries address the business of money market pressures that threaten to abase or raise the value of their currency (a & b only if posit rises, countries moldiness fill the unnecessary demand for orthogonal currency by selling their reserves, if demand falls, then countries must increase demand by buying up the excess supply with domestic currency) In the literary debate on fixed versus floating exchange evaluate, the surdest argument for a floating rate is that it frees macroeconomic policy from taking maintenance of the exchange rate.why is this also the weakest argument (the freeing of fiscal policy from the toil of maintaining an exchange rate creates a drop of external discipline on monetary policy and leads to an over reliance on inflationary policies to satisfy domestic economic needs) Suppose a bond issued by the European Central Bank and denominated in euros pays 2% per year.Today the exchange rate is 1.87 dollars per euro. It is expected that the exchange rate in one year lead be 2.06 dollars per euro. What is the annual dollar return on this bond (12 percent) The price of a currency that will be delivered in the prospective is called (THE FORWARD qualify prise) Under a Gold Standard (THE EXCHANGE RATE IS FIXED)Which is true (SOME COUNTRIES PEG TO A wicket OF CURRENCIES)Which of theeffects is not considered when choosing an exchange rate system (THE FISCAL ((SPENDING)) POLICY THAT THE CHOOSING COUNTRY WILL MAINTAIN) Which of the following(a) would be evoke in keeping foreign currency to engage in transactions (a & d only a tourist, a manufacturing firm) Which of the following would be interested in holding foreign currency to take avail of investment opportunities (a portfolio manager)SUPPOSE THE DOLLAR- pine away EXCHANGE RATE IS 0.013 DOLLARS PER YEN. SINCE THE BASE YEAR, INFLATION HAS BEEN 1 per centum IN JAPAN AND 9 shargon IN THE UNITED STATES. WHAT IS THE current EXCHANGE RATE (.0120) WORK REAL EXCHANGE RATE = (NOMINAL EXCHANGE RATE) X (( unconnected PRICES) / (DOMESTIC PRICES)) THE FOREIGN AND DOMESTIC PRICES ARE FOUND BY TAKING 100 + THE INFLATION PERCENT.THEREFORE, THE REAL EXCHANGE RATE = 0.013 X ((101) / (109)) = 0.0120 IN REAL TERMS, THE DOLLAR HAS APPRECIATED AGAINST THE YEN (TRUE)DUE TO THIS CHANGE, THE U.S. DOLLAR WILL (APPRECIATE), THE Canadian DOLLAR WILL (DEPRECIATE), AND THE LENGTH OF THE nucleus WILL BE (MEDIUM RUN)Exports represent round ___ percent of Israels economy (40) unmatchable of the reasons Israels currency has appreciated tardily is due to (low interest rates in other major economies) Israels bench mark interest rate is now (1.25%)Market determined currency exchange rates are also known as (floating exchange rates) What is the involve of currency depreciation on the country experiencing the decline in currency value (exports will increase) When a country allows their currency to depreciate it will (increase exports) When a foreign currency becomes more expensive in terms of some other currency it is said to have (appreciated)How will lowering the interest rates encounter the value of the currency (it will depreciate the currency) How does the appreciation of the British pound versus the euro impact the British economy? Goods priced in pounds are now (more expensive to consumers in Europe that use the euro, resulting in a move on decline in British exports)Why is the British pound appreciating versus the euro (because investors and savers that hold their wealth in euros are looking for risk-free haven currencies to place their money) How does the Bank of Englands quantitative mitigation impact the pounds strength (normallyquantitative easing would cause a currency to depreciate, so the fact that the pound is appreciating provides a strong indicator of investors fear of the euro)