A) If a government wants to reduce the value of its currency using direct FX intervention, then the government should sell its currency. This lead to increase in the supply of the the domestic currency and reduce in the value of domestic currency relative to dollar.
B) If a government uses indirect FX intervention, then the government may reduce tariffs and increase the supply of money in the market leading to reduce in the value of currency rrlative to dollar.
C) sterilized intervention involves purchase or sale of securities without changing the monetary base. In order to reduce the value of currency relative to dollar, the government should buy dollar denominated bonds, increasing the supply of domestic currency. After this in order to maintain the monetary base the government will sell domestic currency bond to sterilize the buy of dollar denominated bond. If this is not sterlized it leads to reduce in the value of domestic currency relative to dollars.
If a government wanted to reduce the value of its currency relative to the dollar, a....
In 2015, Switzerland stopped pegging its currency to the Euro, and instead reduced interest rates in an attempt to lower the value of its currency. This shift was a switch from _____ to _______ Question 4 options: Indirect Intervention / Direct Intervention Direct Intervention / Indirect Intervention Capital Controls / Indirect Intervention Direct Intervention / Capital Controls
If the U.S. dollar appreciates relative to foreign currency, what is likely to be the result for the U.S. company that has company branches abroad? Select one: a. Profits will increase, when measured in U.S. dollars. b. Profits will decrease, when measured in U.S. dollars. c. Foreign exports to the United States will decrease. d. Foreign demand for U.S. goods and services will decrease. If a company is considering optimizing the physical location for every activity in the value chain,...
The sum of currency and bank deposits at the central bank is called: a. the money supply. b. domestic assets. c. the monetary base. d. fractional reserves. Official intervention in the foreign exchange market to defend a fixed exchange rate when the value of the country's currency is under downward pressure causes a. international reserve holdings to rise. b. a downward pressure on the country's interest rates. c.an increase in the liabilities of the central bank. d. the domestic money...
1. Inflation erodes the purchasing power of a nation's currency. T/F 2. Use the following table to answer the next two questions. In Terms of USD Country Bid Ask Brazil $.3033 $.3055 Euro $1.2216 $1.2220 2-a. What is the ask quote for Brazilian reais (R$) in terms of euros (€)? a. €.2482 b. €3.9984 c. €.2501 d. €4.0290 2-b. What is the ask quote for euros in terms of reis? Round intermediate steps to four decimals. a. R$4.0290 b. R$3.9987...
If the Fed wanted to reduce the federal funds interest rate, it might: A. increase the discount rate. B. increase the required reserve ratio. C. buy government securities. D.sell government securities. E. do any of the above except c.
1. Why does a rise in the dollar hurt Markel? How does a falling dollar help Markel? (Shapiro, p. 403) 2. What does Markel do to hedge its currency risk? Can Markel use hedging to completely eliminate its currency risk? (Shapiro, p. 403). 3. What are the basic elements of Markel’s pricing policy? Does this pricing policy reduce its currency risk? Explain. (Shapiro, p. 403) 4. What were the key components of Laker Airways’ operating exposure? (Shapiro, p. 416)
Challenge Problem. Following are currency exchange “crossrates” between pairs of major currencies. Currency crossrates include both direct and indirect methods for expressing relative exchange rates. Currency crossrates include both direct and indirect methods for expressing relative exchange rates. U.S. U.K. Swiss Japanese European Dollar Pound Franc Yen Euro EMU 1.1406 ? 0.6783 0.0087 --- Japan 130.66 185.98 77.705 --- 114.60 Switzerland 1.6817 2.3936 --- 0.0129 ? United Kingdom ? --- 0.4178 ? 0.6162 United States --- 1.4231 ? 0.0077 0.8767 a. Fill in the missing exchange rates in the crossrates table. b. If the inflation rate is expected to be 3 percent in the European Monetary Union (EMU) and 4 percent in...
Peso Changes. In December 1994, the government of Mexico officially changed the value of the Mexican peso from 3.163.16 pesos per dollar to 5.475.47 pesos per dollar. What was the percentage change in its value? Was this a depreciation, devaluation, appreciation, or revaluation? Explain. What was the percentage change in its value? 1. The percentage change in peso value is (%). (Round to two decimal places.) Was this a depreciation, devaluation, appreciation, or revaluation? Explain. (Select all the choices that...
Explanations 10. An Australian currency speculator believes that the New Zealand dollar will appreciate relative to the Australian dollar. Which of the following transactions on Australia's balance of payments is most likely to result? a. A credit and debit on the capital account b. A credit and debit on the current account c. A credit on the capital account and a debit on the current account d. A credit on the current account and a debit on the capital account...
Consider a hypothetical country Econostan that uses the dollar as its currency. For the fiscal year, the Econostani government spent $125 million, and collected $140 million. At the beginning of the year, Econostan had total debt outstanding of $850 million. Econostani's total GDP for the year was $1,670 million. Use this information to answer the next several questions (81 - 84) amount. 81. For the fiscal year, we would say that the Econostani government experienced a a) balanced budget; $0...