Homework Answers
A. As many Canadians plan to spend vacation in Florida, the demand for US dollars would rise( the spending will be done in US dollars in Florida). Thus, the American dollar will appreciate in relation to Canadian dollar.
In other words, Canadian dollar will be pressured to depreciate.
B. If the American interest rates in US are substantially higher than Canada, more Canadians will invest in the United States. This will increase the demand for US dollars and appreciate the US dollars.
The Canadian dollar will depreciate relative to US dollars due to outflow of investment.
C. When interest rates in Canada is higher, investors will be willing to invest in Canada and thus, demand for Canadian dollar will rise. Given supply same and rise in demand of Canadian dollar, the Canadian dollar will be pressured to appreciate.
D. The increased preference for Quebec's maple will increase the demand for it. To pay for the import of maple syrup, the demand for Canadian dollar will rise.
Thus, the pressure on Canadian dollar will be to appreciate.
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Please help me with 19. A-D.
19. A) Assume the exchange rate was fixed at 1...
Predict whether the following factors would cause the exchange rate of the Canadian dollar to strengthen...
Predict whether the following factors would cause the exchange rate of the Canadian dollar to strengthen or to weaken. Sketch a supply and demand diagram of the exchange rate market for the Canadian dollar to illustrate your answer. Interest rates go up in the United States Financial investors expect the Canadian dollar to depreciate in the next few months Canadian inflation falls relative to other countries Interest rates fall in Canada The Canadian dollar is below the PPP exchange rate
Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate o...
Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate of C$1.340/US$. What should the Bank of Canada do? a. Stop trading with the U.S. so that fewer U.S. dollars will flow into Canada. b. Sell U.S. dollars (buy Canadian dollars). c. Sell Canadian dollars (buy U.S. dollars). d. Purchase British pounds and sell French francs.
Suppose the exchange rate...
1. An increase in Canada's interest rates relative to US interest rates should A. encourage more Canadians...
1. An increase in Canada's interest rates relative to US interest rates should A. encourage more Canadians to vacation in the US B. encourage more Americans to vacation in Canada C. decrease the value of the Canadian dollar D. stimulate Canada's exports 2. Which of the following is not likely to result in an appreciation of the Canadian dollar? A. more Canadians vacation in Florida B. the demand for Canadian dollars on foreign exchange markets exceeds the supply C. an increase in Canadian interest rates D. expectations of...
Please answer in an 'A,B,C,D' format where A would be the first answer and D would...
Please answer in an 'A,B,C,D' format where A would be the first
answer and D would be the last. Thank you.
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QUESTION 1: Suppose that the current spot exchange rate is GBP1= €1.50 and the one-year forward...
QUESTION 1: Suppose that the current spot exchange rate is GBP1= €1.50 and the one-year forward exchange rate is GBP1=€1.60. One-year interest rate is 5.4% in euros and 5.2% in pounds. If you have EUR1,000,000, what is the Covered Interest arbitrage profit in EUR? QUESTION 2: Suppose that the current spot exchange rate is GBP1= €1.50 and the one-year forward exchange rate is GBP1=€1.60. One-year interest rate is 5.4% in euros and 5.2% in pounds. If you conduct covered interest...
1. Under a floating exchange rate regime with a high degree of capital mobility, in the...
1. Under a floating exchange rate regime with a high degree of capital mobility, in the short run an expansionary fiscal policy will most likely create pressure on: a. the domestic currency to appreciate. b. the domestic currency to depreciate. c. monetary authorities to revalue the domestic currency. d. monetary authorities to devalue the domestic currency. 2. Under a floating exchange rate regime with a high degree of capital mobility, a change in the exchange rate value of domestic currency...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the D...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged Shift the appropriate curve or c on the following graph to illustrate how this affects the market for Danish kroner if...
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Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate of C$1.340/US$. What should the Bank of Canada do? a. Stop trading with the U.S. so that fewer U.S. dollars will flow into Canada. b. Sell U.S. dollars (buy Canadian dollars). c. Sell Canadian dollars (buy U.S. dollars). d. Purchase British pounds and sell French francs.
Suppose the exchange rate...
Please answer in an 'A,B,C,D' format where A would be the first
answer and D would be the last. Thank you.
QUESTION 22 Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 U.S. and in Montreal it costs $15 Canadian, then _____ Canadians will buy CDs in St. Louis Virgin Records will have an incentive to build more stores in North America Americans will buy CDs in Montreal o purchasing power parity exists QUESTION...
P18-1 (similar to) Question Help Foreign exchange and commodity prices. While traveling in the following countries, you see twenty-ounce plastic bottles of Coca-Cola. You know the price in the United States for a Coke is $1.02, but the countries have the following prices: Canada: C$1.46 Japan: *145 England: £0.49 European Union: €0.85 What is the implied exchange rate for U.S. dollars and these four currencies? What is the implied direct, or American, exchange rate between the U.S. dollar ($) and...
5. Changes in the foreign-exchange market The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged Shift the appropriate curve or c on the following graph to illustrate how this affects the market for Danish kroner if...
5. Balance of payments and the foreign exchange market The following graph shows the market for euros, which is initially in equilibrium. Suppose an economic expansion in Canada leads to an increase in the incomes of Canadian households, causing imports from Europe to rise. On the graph, illustrate the effect of an economic expansion on the market for euros by shifting the appropriate curve or curves. Note: Select and drag one or both of the curves to the desired position....
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