5. The stability advantage Suppose the United States is experiencing a financial crisis, leading many investors around the world to view the dollar as a risky currency. Also suppose that the euro is viewed as a safe currency. The following graph shows the supply and demand for dollar. Adjust the following graph to show what is most likely to happen in the foreign exchange market for dollars. VALUE OF THE DOLLAR Supply Demand In the market for the euro, the demand for euros would True QUANTITY OF THE DOLLAR False Demand 0 Supply causing the euro to To attenuate the negative consequences of this change in currency value, the U.S. government, with the help of the Federal Reserve, implements a fixed exchange rate policy. This type of policy would establish a price floor for the dollar in the foreign exchange market. all else equal.

Explain how monetary considerations, such as currency, exchange rates, and exchange-rate management, would impact the organization’s decision to expand into your selected market, using current exchange rates between China and the United States to support your explanations.   Category The U.S. Dollar The Chinese Yuan Exchange Rate 1 USD ≈ 7.24 Yuan 1 Yuan ≈ 0.14 USD

A. Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand. i. Explain how growth in the demand for Canada's natural resources would affect the demand for Canadian dollars in the foreign exchange market. Explain how the supply of Canadian dollars would change. ii. iii. Explain how the value of the Canadian dollar would change. iv. Illustrate your answer with a graphical analysis. 1

Use the following information to answer Questions 78 to 80: The Czech Republic, whose own currency is the koruna (Kë) and whose foreign currency is the euro (€), begins to intervene in the exchange market in order to stimulate its exports to the EU. Kč J€ Se {left} {right} De Qe To stimulate its exports the Czech central bank could O neither sell euros O buy euros

3. If interest rates increase in a country with a fixed exchange rate, what will the central bank do? A. Buy the country's currency B. Sell the country's currency C. Engage in contractionary fiscal policy 4. The United States has floating exchange rates. Suppose there is an increase in inflation in the United States. What will happen? A. The U.S. central bank will sell U.S. currency so the exchange rate remains constant B. The U.S. central bank will buy Euros so the exchange rate remains constant C. The exchange rate (price of a dollar) will go up D. The exchange rate (price of a dollar) will go down 5. Belize uses a fixed exchange rate, with one Belize dollar equal to one half of a U.S. dollar. There is an increase in U.S. citizens traveling to Belize on vacation. What will the central bank do? A Buy the country's currency B. Sell the country's currency Sell bonds to banks C.

At the official exchange rate of 2.5 dirham per euro, the euro is and the Moroccan dirham is that Moroccans pay for European exports than they would with a free-floating exchange rate. At the official dirham price of euros, there is a of euros in the foreign exchange market. which means Suppose the governments of the Eurozone and Morocco reevaluate their currencies so that their official exchange rate is now 1 dirham per 1 euro. This action results in of the euro.

36. When a country's goods and services are expensive relative to other countries', we say that its currency is ________ in terms of purchasing power parity.   Question 36 options:   a)  irrational   b)  rational   c)  overvalued   d)  undervalued

Paragraph H H Euros per Dollar Quantity of Dollars Styles 1 Title 1. Headline: Fed raises interest rates; attracts foreign investors. Supply of dollars (increase / decrease / stay the same) Demand for dollars (increase / decrease / stay the same) Euros per Dollar (increase / decrease / stay the same) Quantity of Dollars (increase / decrease / stay the same) Select- Editing Create PDF C and Share link Sh A Consider the foreign exchange market for dollars as discussed in Chapter 14, section 3.2 of your text and depicted above. How would the news headlines below affect the market for foreign exchange? Highlight or change the color of your response. 2 Display Settings

5)  Indicate whether each of the following creates a demand for or a supply of European euros in foreign exchange markets: a.  Liberty purchases an Airbus plane assembled in France b.  Mercedes-Benz decides to build an assembly plant in Knoxville c.  A Liberty student decides to spend a year studying at the Sorbonne in Paris d.  An Italian manufacturer ships machinery from Rome to Venice on an Egyptian freighter e.  It is widely expected that the euro will depreciate in the near future

8. Why exchange rates matter Suppose that you go on vacation to Canada every summer. Last year, the hotel room where you stayed cost C$100 per night, and it costs the same this year. The exchange rate was 1.04 US$/C$ last year, and it is 0.95 US$/C$ this year. This means you will pay per night this year than you paid last year. The U.S. dollar-Canadian dollar exchange rate is essentially the price of a Canadian dollar in terms of U.S. dollars. When this price falls, the Canadian dollar is said to depreciate against the U.S. dollar. Thus, from your analysis, you can conclude that when the Canadian dollar depreciates against the U.S. dollar, Canadian goods and services become expensive for Americans. DeutschAuto is a German automaker that pays most of its production costs in euros. Suppose that in 2007, DeutschAuto's cost of producing a car was €23,000 and that the company sold a car in the United States for $36,000. Further, suppose that the dollar-euro exchange rate rose from 1.35$/ €…