Initially, the Canadian economy is at a long-run equilibrium, denoted by E on the graph at the right. Suppose that mad cow disease occurs in Canada, which leads to a reduction in the world demand for Canadian beef products. A reduction in the demand for Canadian beef products implies a reduction in the supply of foreign currency in Canada, which results in the depreciation of the Canadian dollar. If the dollar's movement is not corrected as would be the case under a flexible exchange rate system, there will be stimulation to the demand for other Canadian exports, dampening the shift of the AD curve relative to the case with the fixed exchange rate system. Assuming there is a flexible exchange rate system, the new aggregate demand curve will be CD Price Level (P) E Yf ASO ADO AD1 AD₂ Real GDP (Y)

To prevent an appreciation of the British pound, the U.S. Federal Reserve has to: Sell U.S. currency Buy British currency Sell British currency Devalue the U.S. dollar

Suppose that at some point the spot exchange rate is equal to 100 yen per one U.S. dollar, while the interest rate in dollars is 6% and the interest rate in yen is 1%. What is the approximate forward rate that is consistent with this situation?

Assume that in 2010, Country A had an exchange rate of 0.770.77 units of national currency (UNC) per U.S. dollar (USD). By 2015, Country A's budget deficit increased, and Country A decided to issue bonds to finance the deficit. As a result, the exchange rate changed by UNC0.06UNC⁢0.06. Calculate the 2015 exchange rate.

Suppose the exchange rate value of the dollar depreciates. Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the option once to place a check mark. For incorrect answer(s), click the option twice to empty the box. Who are the winners? People who want to buy foreign assets Firms that export goods People who want to buy assets in this country People who travel abroad Firms that import goods People who travel to this country

Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates.   If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be (multiplied or offset) by the losses from currency appreciation.

According to the purchasing-power-parity theory, the U.S. dollar maintains its purchasing-power parity if it depreciates by an amount equal to the excess of:   Question 3 options:   a)  Foreign inflation over U.S. inflation   b)  Foreign interest rates over U.S. interest rates   c)  U.S. interest rates over foreign interest rates   d)  U.S. inflation over foreign inflation

Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates.   Based on your understanding of the relationship between relative inflation rates and exchange rates, identify whether the preceding statement is valid or invalid. The statement is invalid, because the nominal interest rate is independent of the inflation rate.   The statement is valid, because the nominal interest rate is the sum of the real interest rate plus inflation, so lower inflation rates would result in lower interest rates.

Assume that you are studying exchange rates between India and the US. Assume that the equilibrium exchange rate in India is 76 Indian rupees per US dollar. Now suppose that the inflation rate falls in India. Which of the following choices shows a change we would expect to see in the Indian forex market? The demand for the US dollar would rise, leading to a depreciation of the Indian rupee. The demand for the Indian rupee would increase leading to an appreciation of the US dollar. The supply of the Indian rupee would rise leading to an appreciation of the Indian rupee. The supply of the US dollar would rise leading to an appreciation of the Indian rupee

By controlling the exchange rate of the Yuan and “pegging” it to the U.S. Dollar:   a) is helping the United States improve its balance of trade   b) the Yuan is overvalued   c) the Yuan is undervalued   d) the Yuan is properly valued   e) China is hurting their ability to export