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What is the effect of increasing us price level on the dollars exchange rate? explain in...
The exchange rate effect of a price increase is: if the US price level increases, then the Fed increases interest rate in order to stabilize the price level. As a result US dollar appreciates causing US exports to decreases. a. False b. True If the Fed increases money supply, then: a. the value of money decreases. b. the price level increases. c. Both of the above d. none of the above Which of the following will the Aggregate Demand curve...
Assume the exchange rate is defined as f/$. What is the real exchange rate? If there is and appreciation of the $, what happens to the price of foreign goods measured in dollars and of US goods measured in the foreign currency? What is the effect on US imports and exports and Y. Explain.
The present exchange rate between US dollars and Euros is 1.34 $/Euro. The price of a domestic 180-day Treasury bill is $99.50 per $100 face value. The price of the analogous Euro instrument is 98.50 Euros per 100 Euro face value. a. What is the theoretical 180-day forward exchange rate? b.Suppose the 180-day forward exchange rate available in the marketplace is 1.31 $/Euro. This is less than the theoretical forward exchange rate, so an arbitrage is possible. Describe a risk-free...
1. The present exchange rate between US dollars and Euros is 1.34 $/Euro. The price of a domestic 180-day Treasury bill is S99.50 per $100 face value. The price of the analogous Buro instrument is 98.50 Euros per 100 Euro face value (a) What is the theoretical 180-day forward exchange rate? (b) Suppose the 180-day forward exchange rate available in the marketplace is 1.31 $/Euro. This is less than the theoretical forward exchange rate, so an arbitrage is possible. Describe...
D 3. In a graph of supply and demand for US dollars, with the exchange rate on the vertical axis, suppose that the US interest rate decreases. Then the demand curve will shift to the __and the exchange rate will. left; decrease left; increase right; decrease right; increase
using a well labelled graph, explain how the real exchange rate between the US and EU is determined in the long-run. also, explain the slopes of the demand and supply curves in your graph. if there is an increase in the relative demand for european goods, what will happen to the real exchange rate?
Using the flexible-price monetary approach to the exchange rate, explain briefly the effect of the following shocks on the equilibrium exchange rate: (i) A reduction in the external interest rate that is expected to be temporary. (ii) A permanent improvement in the productivity of the domestic economy caused by economic reforms.
When the price level falls, it causes the real
exchange rate to depreciate. This is called the
When the price level falls, it causes the real exchange rate to depreciate. This is called the Select one: a. Wealth effect o b. Interest-rate effect o c Open economy effect d. None of the above
If the U.S. price level is increasing by 3 percent annually and the Japanese price level is increasing by 1 percent annually, then according to purchasing-power parity, by about what percent would the nominal exchange rate be changing? decreasing by 4 percent decreasing by 2 percent increasing by 4 percent increasing by 2 percent
The spot exchange rate today is 1.32 US Dollars for every Euro. Suppose the 6-month continuously compounded interest rates are 2% in the US and 3% in Europe. (a) What should the price of a currency futures contract deliverable in 6 months be? (b) Suppose that the futures price quoted in the market is 1.30. What would you do to profit from the situation? Is it an arbitrage? Hint: Long a futures contract (for the quoted futures price), lend out...