QUESTION 1: The rationale behind PPP is that: 1. Inflation and interest rate have positive relation....
QUESTION 1:
The rationale behind PPP is that:
1. Inflation and interest rate have positive relation.
2. Interest rate increases make local currency stronger in the
future
3. Interest rate increases make local currency weaker in the
future
4. Interest rate increases make local currency weaker in forward
market
5. Interest rate increases make local currency stronger in forward
market
6. Higher inflation makes local currency weaker in the future
7. Higher inflation makes local currency stronger in the
future
8. Higher inflation makes local currency weaker in forward
market
9. Inflation makes local currency stronger in forward market
Type the number of correct choice below.
QUESTION 2:
The rationale behind IFE is that:
1. Inflation and interest rate have positive relation.
2. Interest rate increases make local currency stronger in the
future
3. Interest rate increases make local currency weaker in the
future
4. Interest rate increases make local currency weaker in forward
market
5. Interest rate increases make local currency stronger in forward
market
6. Higher inflation makes local currency weaker in the future
7. Higher inflation makes local currency stronger in the
future
8. Higher inflation makes local currency weaker in forward
market
9. Inflation makes local currency stronger in forward market
Type the number of correct choice below.
Homework Answers
Q.1 (6) PPP shows the relation in inflation and exchange rate. if in a country inflation rate rises relative to another country than it leads to decline export and increase in import that depresses the local country currency in the future market.
Q.2 (3) IFE shows the relation in interest and exchange rate. if in a country interest rate rises relative to another country depress the local country currency in the future market because higher interest rates reflect the higher inflation.
Add Answer to:
QUESTION 1:
The rationale behind PPP is that:
1. Inflation and interest rate have positive relation....
The International Fisher Effect (IFE), Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are three...
The International Fisher Effect (IFE), Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are three very important theories in international finance, each with its own predictions and implication. Which of the following is correct? IRP suggests that a change in interest rate differential will not change the currency's forward premium/discount. According to purchasing power parity (PPP), if a foreign country's inflation rate is below the inflation rate at home, home country consumers will increase their imports from the foreign...
QUESTION 9 The differences between purchasing power parity (PPP) and covered interest rate parity (CIRP) include:...
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Several factors affect the exchange rate of a currency with another currency. Which of the following...
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Question 20(Multiple Choice Worth 1 points) If nominal interest rate equals 12 percent and inflation is...
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Several factors affect the exchange rate of a currency with another currency. Which of the following statements are true about the factors that have an impact on exchange rates? Check all that apply. When a government limits imports and restricts foreign exchange transactions, its currency's value tends to increase relative to other currencies. An increase in inflation tends to increase the currency's value with respect to other currencies with lower inflation. If a government intends to prevent its currency's value...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is negative O the real interest rate is greater than the nominal interest rate O The nominal interest rate must be equal to the real interest rate The real interest rate is positive O None of the above
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