Homework Answers
Answer: (d)
When there is appreciation of currency, export becomes costly and it would lead to fall in the export earning, so now earning of foreign exchange would also go down. Eventually currency would start depreciating.
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QUESTION 7 Select all that are true given an appreciation of the domestic currency: The carry...
QUESTION 1 10 points Save Answer Select all that are true given an increase in domestic...
QUESTION 1 10 points Save Answer Select all that are true given an increase in domestic interest rates: It indicates investment flowing out of the loanable funds market, ceteris paribus It will attract foreign investment into the domestic economy, mitigating the increase It indicates a growing domestic economy The thickly and freely traded currency spot markets will restore interest rate parity between countries QUESTION 2 10 points Save Answer Select all of the following that are true regarding interest rates...
QUESTION 1 10 points Save Answer Select all of the following that are true regarding interest...
QUESTION 1 10 points Save Answer Select all of the following that are true regarding interest rates and foreign exchange rates, ceteris paribus When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency When a domestic currency depreciates, domestic interest rates rise When domestic interest rates rise the domestic currency depreciates Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates...
QUESTION 1 Select all that are true given an acceleration of economic growth in the Brazilian...
QUESTION 1 Select all that are true given an acceleration of economic growth in the Brazilian economy: Long term investors would invest in the Brazilian economy, but only if the structural aspects of its economy support it Monetary policy, in reaction to the unexpected growth, would decreases the money supply, appreciating the domestic currency The domestic interest rate would increase until new domestic investment and the carry trade mitigate it The domestic currency (Real) would appreciate as foreign investors seek...
QUESTION 7 Select all that are true given an increase in exports from the domestic economy:...
QUESTION 7 Select all that are true given an increase in exports from the domestic economy: Domestic economic growth slows The relative price of exports falls Investment from the domestic economy to the foreign economies decreases The domestic currency depreciates QUESTION 8 The current account moves in to surplus, select all of the following that might result: The home price of goods increases Assuming no change in foreign reserves, the domestic interest rate rises Demand for DC increases Output increases
QUESTION 5 Select all of the following that are true regarding interest rates and foreign exchange...
QUESTION 5 Select all of the following that are true regarding interest rates and foreign exchange rates, ceteris p aribus Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates When a domestic currency depreciates, domestic interest rates rise When domestic interest rates rise the domestic currency depreciates When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency
QUESTION 3 Select all of the following that are true regarding interest rates and foreign exchange...
QUESTION 3 Select all of the following that are true regarding interest rates and foreign exchange rates: When domestic interest rates rise the domestic currency depreciates When a domestic currency depreciates, domestic interest rates rise Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency QUESTION 4 Select all that are...
QUESTION 3 10 points Save Answer Select all that are true regarding Quantitative Easing (QE): The...
QUESTION 3 10 points Save Answer Select all that are true regarding Quantitative Easing (QE): The risks of QE include uncertainty over inflation expectations since it has never been done and it involves massive increases in the money supply, a lack of incentives to borrow since interest rates are so low for so long, and a disincentive for banks to lend due to regulatory uncertainty QE is expressly designed to depreciate the domestic currency via increases in the supply of...
QUESTION 1 Following a report of additional economic growth in country A (the domestic currency), the...
QUESTION 1 Following a report of additional economic growth in country A (the domestic currency), the balance of payments re-equilibration occurs in which order? - The DC depreciates - . . - - - - Foreign agents increase their interest in domestic investment (DI) Foreign agents decrease their demand for the domestic currency (DC) to trade Foreign agents increase their demand for the domestic currency (DC) to trade The fx re-equilibrates to new level The relative price (RP) of exports...
QUESTION 5 Select all that are true regarding investors and fx Currency forwards and futures can...
QUESTION 5 Select all that are true regarding investors and fx Currency forwards and futures can be used to mitigate fx risk for a foreign investment's "return trip" Currency swaps of two future dated exchanges can be used to make a foreign investment today Currency options can be used to hedge the risks of repatriating foreign investment returns. A properly hedged foreign investments will always have a higher total return than an uncovered foreign investment QUESTION 6 Select all that...
QUESTION 2 Select all of the following that are true regarding a fx transaction, ceteris paribus: O As a currency a...
QUESTION 2 Select all of the following that are true regarding a fx transaction, ceteris paribus: O As a currency appreciates, exports are reduced An modest increase in a country's inflation rate will appreciate its currency A reduction in long term fiscal policy investment in a country will appreciate the currency As a currency appreciates, inflation due to imports is reduced A modestly more contractionary monetary policy will appreciate a country's currency
QUESTION 1 10 points Save Answer Select all that are true given an increase in domestic interest rates: It indicates investment flowing out of the loanable funds market, ceteris paribus It will attract foreign investment into the domestic economy, mitigating the increase It indicates a growing domestic economy The thickly and freely traded currency spot markets will restore interest rate parity between countries QUESTION 2 10 points Save Answer Select all of the following that are true regarding interest rates...
QUESTION 1 10 points Save Answer Select all of the following that are true regarding interest rates and foreign exchange rates, ceteris paribus When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency When a domestic currency depreciates, domestic interest rates rise When domestic interest rates rise the domestic currency depreciates Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates...
QUESTION 1 Select all that are true given an acceleration of economic growth in the Brazilian economy: Long term investors would invest in the Brazilian economy, but only if the structural aspects of its economy support it Monetary policy, in reaction to the unexpected growth, would decreases the money supply, appreciating the domestic currency The domestic interest rate would increase until new domestic investment and the carry trade mitigate it The domestic currency (Real) would appreciate as foreign investors seek...
QUESTION 7 Select all that are true given an increase in exports from the domestic economy: Domestic economic growth slows The relative price of exports falls Investment from the domestic economy to the foreign economies decreases The domestic currency depreciates QUESTION 8 The current account moves in to surplus, select all of the following that might result: The home price of goods increases Assuming no change in foreign reserves, the domestic interest rate rises Demand for DC increases Output increases
QUESTION 5 Select all of the following that are true regarding interest rates and foreign exchange rates, ceteris p aribus Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates When a domestic currency depreciates, domestic interest rates rise When domestic interest rates rise the domestic currency depreciates When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency
QUESTION 3 Select all of the following that are true regarding interest rates and foreign exchange rates: When domestic interest rates rise the domestic currency depreciates When a domestic currency depreciates, domestic interest rates rise Interest rate parity between countries is a reasonable assumption due to arbitrage and floating exchange rates When domestic interest rates rise due to monetary policy, the domestic currency appreciates solely because of the decreased supply of the domestic currency QUESTION 4 Select all that are...
QUESTION 3 10 points Save Answer Select all that are true regarding Quantitative Easing (QE): The risks of QE include uncertainty over inflation expectations since it has never been done and it involves massive increases in the money supply, a lack of incentives to borrow since interest rates are so low for so long, and a disincentive for banks to lend due to regulatory uncertainty QE is expressly designed to depreciate the domestic currency via increases in the supply of...
QUESTION 1 Following a report of additional economic growth in country A (the domestic currency), the balance of payments re-equilibration occurs in which order? - The DC depreciates - . . - - - - Foreign agents increase their interest in domestic investment (DI) Foreign agents decrease their demand for the domestic currency (DC) to trade Foreign agents increase their demand for the domestic currency (DC) to trade The fx re-equilibrates to new level The relative price (RP) of exports...
QUESTION 5 Select all that are true regarding investors and fx Currency forwards and futures can be used to mitigate fx risk for a foreign investment's "return trip" Currency swaps of two future dated exchanges can be used to make a foreign investment today Currency options can be used to hedge the risks of repatriating foreign investment returns. A properly hedged foreign investments will always have a higher total return than an uncovered foreign investment QUESTION 6 Select all that...
QUESTION 2 Select all of the following that are true regarding a fx transaction, ceteris paribus: O As a currency appreciates, exports are reduced An modest increase in a country's inflation rate will appreciate its currency A reduction in long term fiscal policy investment in a country will appreciate the currency As a currency appreciates, inflation due to imports is reduced A modestly more contractionary monetary policy will appreciate a country's currency
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