ZuoTi.Pro
Question

13) Suppose the interest rate in Canada falls and the interest rate in Japan remains the same. Interest rate parity implies t
business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

C) the yen is expected to depreciate against the dollar.

A decrease in the interest rate in Canada implies a relative rise in interest rates in Japan. This means that the interest rate in Japan has increased. Since an increase in interest rate leads to reduction in the inflation rate and depreciation of a currency, the yen is expected to depreciate against the dollar.

0 0
Add a comment
Know the answer?
Add Answer to:
13) Suppose the interest rate in Canada falls and the interest rate in Japan remains the...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • We start with a 3 percent real interest rate in the United States and in Japan....

    We start with a 3 percent real interest rate in the United States and in Japan. Next, the real interest rate in Japan falls to 2 percent, and the U.S. real interest remains constant. As a result, A. the yen will appreciate, and the dollar will depreciate. B. both the yen and the dollar will appreciate. C. the yen will depreciate, and the dollar will appreciate. D. both the yen and the dollar will depreciate.

  • I. Label each of the following statements true, false, or uncertain. Explain your choice carefully. A...

    I. Label each of the following statements true, false, or uncertain. Explain your choice carefully. A fiscal expansion, all other factors equal, tends to increase net exports. Fiscal policy has a greater effect on output in an economy with fixed exchange rates than in an economy with flexible exchange rates. Other things equal, the interest parity condition implies that the domestic currency will appreciate in response to an increase in the expected exchange rate. If financial investors expect the dollar...

  • a) If the dollar is expected to appreciate against the yen, uncovered interest parity implies that...

    a) If the dollar is expected to appreciate against the yen, uncovered interest parity implies that the U.S. nominal interest rate must be greater than the Japanese nominal interest rate.

  • U.S. (Nominal Interest Rate) = 4% Canada (Nominal Interest Rate) = 5% According to economic theor...

    U.S. (Nominal Interest Rate) = 4% Canada (Nominal Interest Rate) = 5% According to economic theory, investors will move their funds from U.S. to Canada because they earn a better interest rate, therefore, demand for Canadian $ will increase, so Canadian $ will appreciate, and $ will depreciate. According to the fishier effect, real interest rate is assumed to usually be in equilibrium. So,                                              Nominal Interest Rate = Real Interest Rate + Expected Inflation   U.S. 4% = 3%                             + 1%...

  • 9. What is the most commonly used method to s e most commonly used method to...

    9. What is the most commonly used method to s e most commonly used method to settle a futures contract? A) The futures contract buyer delivery of the underlying asset. B) The futures contract seller usu contract buyer usually holds the contract to the maturity date and takes the es contract seller usually holds the contract to the maturity date and makes me delivery of the underlying asset to the counterpart. utures contract traders usually offset their initial futures positions...

  • This question is based on the following information: PAUD = 7%, iJPY= 2% [i=nominal interest rate;...

    This question is based on the following information: PAUD = 7%, iJPY= 2% [i=nominal interest rate; AUD=Australian dollar; JPY=Japanese yen] _by_ _ % against According to the International Fisher Effect, the Australian dollar must_ the Japanese yen. depreciate/5 appreciate/5 depreciate / 7 depreciate/2 appreciate/7 appreciate/2

  • For the first three questions consider the U.S.- Japan exchange rate, expressed as yen per dollar....

    For the first three questions consider the U.S.- Japan exchange rate, expressed as yen per dollar. Using the basic supply and demand diagram as illustrated at the beginning of Week 9 lecture slides, answer the following: 1. Other things being equal, an increase in the Japanese price level will shift the supply curve of dollars_________, the demand curve for dollars__________ and cause the dollar to ________. a. rightward, leftward, depreciate b. leftward, rightward, depreciate c. leftward, rightward, appreciate d. rightward,...

  • Suppose that you go on vacation to Canada every summer. Last year, the hotel room where you stayed cost C$100 per night, and it costs the same this year. The exchange rate was 1.04 USS/C$ last year,...

    Suppose that you go on vacation to Canada every summer. Last year, the hotel room where you stayed cost C$100 per night, and it costs the same this year. The exchange rate was 1.04 USS/C$ last year, and it is 0.95 US$/C$ this year. This means you will pay than you paid last year. per night this year The U.S. dollar-Canadian dollar exchange rate is essentially the price of a Canadian dollar in terms of U.S. dollars. When this price...

  • 1a. In the foreign exchange market, a decrease in the world demand for Japanese exports a....

    1a. In the foreign exchange market, a decrease in the world demand for Japanese exports a. shifts the demand curve for yen leftward, which causes the yen to appreciate. b. shifts the demand curve for yen rightward, which causes the yen to appreciate. c. shifts the demand curve for yen rightward, which causes the yen to depreciate. d. shifts the demand curve for yen leftward, which causes the yen to depreciate. 1b. A relatively high rate of inflation in the...

  • Jacksonville Corp. is a U.S.‑based firm that needs $600,000. It has no business in Japan but...

    Jacksonville Corp. is a U.S.‑based firm that needs $600,000. It has no business in Japan but is considering one‑year financing with Japanese yen, because the annual interest rate would be 5 percent versus 9 percent in the United States. Assume that interest rate parity exists. a) Can Jacksonville benefit from borrowing Japanese yen and simultaneously purchasing yen one year forward to avoid exchange rate risk? Explain. b) Assume that Jacksonville does not cover its exposure and uses the forward rate...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT