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ECN 438 Final Exam Questions and
Answers 100% Solved | Graded A+
Exchange rates are expressed as: - ✔✔the price of one unit of foreign
currency expressed in terms of the domestic currency.
A term that categorizes patterns of exchange rate behavior is known as: -
✔✔exchange rate regimes
The interest parity condition requires that: - ✔✔the home interest rate
minus its expected rate of currency depreciation (against the foreign
currency) will equal the foreign interest rate
A flexible floating exchange rate system is one in which the: -
✔✔government makes no attempt to fix it against any base currency.
As the expected future spot rate moves closer to the spot rate, uncovered
interest parity indicates that: - ✔✔interest rates should converge.
When a nation's currency appreciates, it purchases _______ units of a
foreign currency and its currency is said to _________. - ✔✔more,
strengthen
,©NINJANERD 2024/2025. YEAR PUBLISHED 2024.
When we look at exchange rates between two countries, what is the
relationship between the exchange rate expressed in units of the domestic
currency and the exchange rate expressed in units of the foreign currency?
- ✔✔One is always the reciprocal of the other.
If the U.S. interest rate is 4% per year and the UK interest rate is 9% per
year, what will happen? - ✔✔The UK Pound depreciates 5% in one year.
The situation in which the difference in interest rates between two
currencies is equal to the expected change in the spot rate over the same
period is known as: - ✔✔uncovered interest parity
In equilibrium, the expected future spot rate equals - ✔✔current forward
rate
Suppose China pegs its currency, the yuan, against the US dollar at a level
that leaves the yuan undervalues on a PPP basis. Suppose also that the
US Federal Reserve conducts monetary policy so as to keep the general
price level in the US stable. Then, according to PPP theory, which of the
following adjustments would occur to restore PPP equilibrium? - ✔✔China
would go through a period of inflation.
Suppose a Big Mac sells for $6.50 in the US and 5.75GBP in Britain. If the
market exchange rate is .80 pounds per dollar, what is true? - ✔✔The
, ©NINJANERD 2024/2025. YEAR PUBLISHED 2024.
dollar is undervalued against the pound on the basis of Big Mac purchasing
power parity.
Since 1995, the avg annual rate of inflation across the entire Mexican
economy has been 8% but, because of improvement in labor productivity
within the manufacturing sector, the rate of inflation within the sector of the
Mexican economy that produces traded goods has been only 3% per year.
In the US, there has been a uniform rate of inflation throughout the
economy of 2% per year. Given this information, which of the following
statements is most consistent with PPP theory? - ✔✔Nominal peso per
dollar rate = increase by 1%, real peso per dollar rate = decrease by 5%.
E: nominal exchange rate between the S. Korean won and Japanese yen
(won per yen). q: represents the real exchange rate, measure as the price
of Japanese goods relative to S. Korean goods. According to PPP, which of
the following would happen if the only difference between the economies of
the two countries was that S. Korea had more general price inflation than
did Japan? - ✔✔E would increase and q would not change.
From 1950-1970, Germany pegged or fixed its currency (the mark) against
the US dollar. Over this period, the average annual rate of inflation in the
US was 3%. Because of the rapid improvements in labor productivity within
ECN 438 Final Exam Questions and
Answers 100% Solved | Graded A+
Exchange rates are expressed as: - ✔✔the price of one unit of foreign
currency expressed in terms of the domestic currency.
A term that categorizes patterns of exchange rate behavior is known as: -
✔✔exchange rate regimes
The interest parity condition requires that: - ✔✔the home interest rate
minus its expected rate of currency depreciation (against the foreign
currency) will equal the foreign interest rate
A flexible floating exchange rate system is one in which the: -
✔✔government makes no attempt to fix it against any base currency.
As the expected future spot rate moves closer to the spot rate, uncovered
interest parity indicates that: - ✔✔interest rates should converge.
When a nation's currency appreciates, it purchases _______ units of a
foreign currency and its currency is said to _________. - ✔✔more,
strengthen
,©NINJANERD 2024/2025. YEAR PUBLISHED 2024.
When we look at exchange rates between two countries, what is the
relationship between the exchange rate expressed in units of the domestic
currency and the exchange rate expressed in units of the foreign currency?
- ✔✔One is always the reciprocal of the other.
If the U.S. interest rate is 4% per year and the UK interest rate is 9% per
year, what will happen? - ✔✔The UK Pound depreciates 5% in one year.
The situation in which the difference in interest rates between two
currencies is equal to the expected change in the spot rate over the same
period is known as: - ✔✔uncovered interest parity
In equilibrium, the expected future spot rate equals - ✔✔current forward
rate
Suppose China pegs its currency, the yuan, against the US dollar at a level
that leaves the yuan undervalues on a PPP basis. Suppose also that the
US Federal Reserve conducts monetary policy so as to keep the general
price level in the US stable. Then, according to PPP theory, which of the
following adjustments would occur to restore PPP equilibrium? - ✔✔China
would go through a period of inflation.
Suppose a Big Mac sells for $6.50 in the US and 5.75GBP in Britain. If the
market exchange rate is .80 pounds per dollar, what is true? - ✔✔The
, ©NINJANERD 2024/2025. YEAR PUBLISHED 2024.
dollar is undervalued against the pound on the basis of Big Mac purchasing
power parity.
Since 1995, the avg annual rate of inflation across the entire Mexican
economy has been 8% but, because of improvement in labor productivity
within the manufacturing sector, the rate of inflation within the sector of the
Mexican economy that produces traded goods has been only 3% per year.
In the US, there has been a uniform rate of inflation throughout the
economy of 2% per year. Given this information, which of the following
statements is most consistent with PPP theory? - ✔✔Nominal peso per
dollar rate = increase by 1%, real peso per dollar rate = decrease by 5%.
E: nominal exchange rate between the S. Korean won and Japanese yen
(won per yen). q: represents the real exchange rate, measure as the price
of Japanese goods relative to S. Korean goods. According to PPP, which of
the following would happen if the only difference between the economies of
the two countries was that S. Korea had more general price inflation than
did Japan? - ✔✔E would increase and q would not change.
From 1950-1970, Germany pegged or fixed its currency (the mark) against
the US dollar. Over this period, the average annual rate of inflation in the
US was 3%. Because of the rapid improvements in labor productivity within
