By fixing the exchange rate, the central bank gives up its ability to A) adjust taxes. B) increase government spending. C) influence the economy through fiscal policy. D) depreciate the domestic currency. E) influence the economy through monetary policy. ANSWER E
Date: September 10th, 2020
Explain the purpose of the following figure 14-2 from the text in the context of the interest rates on the dollar and the Japanese Yen between 1980 and 2010. What will be an ideal response? ANSWER Since the dollar and the Yen interest rates are not measured in comparable terms, they can move quite […]
Date: September 10th, 2020
All else equal, if Canada raises its interest rates, A) the dollar depreciates. B) the U.S. demand for Canadian dollars increases. C) the Canadian supply of Canadian dollars increases. D) Both A and B. E) Both A and C. ANSWER D
Date: September 10th, 2020
Free trade and globalization is generally believed A) to cause a degradation in the world’s environment. B) to improve the environment by correcting for distortions caused by import competing policies. C) to help spread the best of each country’s culture, so as to uplift global cultural standards. D) to help each country safeguard the best […]
Date: September 10th, 2020
If an industry is imperfectly competitive, and markets are segmented then A) a firm may find that it is profitable to engage in dumping. B) a firm may find that international trade is unprofitable. C) a firm may find that it should promote scale economies. D) a firm may find that it has lost its […]
Date: September 10th, 2020
The main difference between stabilization policies and structural reform policies is that stabilization policies A) focus on microeconomic issues and structural reform policies focus on the macroeconomic environment. B) focus on macroeconomic issues and structural reform policies focus on the microeconomic environment. C) are rarely used by reform governments; they prefer to use structural reform […]
Date: September 10th, 2020
If the forward rate is greater than the spot rate, what are markets signaling about their expectations for the future spot rates for the home currency? What will be an ideal response? ANSWER The home currency is expected to depreciate over the maturity period of the forward contact.
Date: September 10th, 2020
The reform movements that began in many Latin American economies in the late 1980s favored A) competitive devaluations. B) stronger military budgets. C) imports substitution policies. D) a stronger role for markets and more openness. E) more government regulation of industry. ANSWER D
Date: September 10th, 2020
International Reserve assets are comprised of gold, foreign exchange, and IMF special drawing rights. Indicate whether the statement is true or false ANSWER TRUE
Date: September 10th, 2020
What are the factors affecting the demand for foreign currency? What will be an ideal response? ANSWER Three factors affect the demand for foreign currency. They are expected return, risk, and liquidity.
Date: September 10th, 2020
