the monetary approach to the balance of payments (under flexible exchange rates) an increase in the proportion of income that people in country A wish to hold as money would, other things equal, lead to _______ in country A's demand for money and to ______ of A's currency in the foreign exchange markets. a. an increase / a depreciation b. an increase / an appreciation c. a decrease / a depreciation d. a decrease / an appreciation

the monetary approach to the balance of payments (under flexible exchange rates) an increase in the proportion of income that people in country A wish to hold as money would, other things equal, lead to _ in country A's demand for money and to of A's currency in the foreign exchange markets. a. an increase / a depreciation b. an increase / an appreciation c. a decrease / a depreciation d. a decrease / an appreciation

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter2: International Flow Of Funds

Section: Chapter Questions

Problem 5QA

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Match each term in Column A with its related definition in Column B. Column A 1. ____________ Spot rate 2. ____________ Currency appreciation 3. ____________ Translation risk 4. ____________ Transaction risk 5. ____________ Exchange rate Column B a. The rate at which one currency can be traded for another currency. b. The possibility that future cash transactions will be affected by changing exchange rates. c. A month ago, 1 U.S. was worth 8.5 Mexican pesos. Today, 1 is worth 9.0 Mexican pesos. The U.S. dollar has undergone what? d. The degree to which a firms financial statements are exposed to exchange rate fluctuation. e. The exchange rate of one currency for another for immediate delivery (today).
Q2-10 Which of the following occurs if a country A depreciates its currency relative to country B's currency? Select one: a. A's export goods become cheaper to A's citizens. b. A's export goods become cheaper to B's citizens. c. B's export goods become cheaper to A's citizens. d. B's export goods become more expensive to B's citizens.
Q1-16 In which of the following relationships between the expected future spot rate [E(e)] of a foreign currency and the current forward rate (efwd) of a foreign currency would a speculator have an incentive to sell foreign currency in the forward market? a. E(e) < efwd b. E(e) > efwd c. E(e) = efwd d. E(e) = (1/efwd)
PQ 5 In the monetary yapproach to the exchange rate, which of the following will cause a depreciation of A's currency relative to B's currency? a. an increase in the amount of money demanded at each income level in the country B b. an increase in the money supply in country B c. a fall in the real income in country B d. a decrease in the money supply in country A
Q3-3 Under a flexible-rate system, when the BP curve is flatter than the LM curve (i.e., there is relative capital mobility), an autonomous increase in foreign interest rates will have what impacts on the domestic interest rate and domestic national income? Select one: a. domestic interest rate will increase, domestic national income will decrease b. domestic interest rate will increase, domestic national income will not change c. domestic interest rate will increase, domestic national income will increase d. domestic interest rate will not change, domestic national income will decrease
A decrease in the expected future domestic exchange rate causes the demand for domestic assets to ________ and the domestic currency to ________ , everything else held constant. increase ; appreciate increase ; depreciate decrease ; appreciate decrease ; depreciate
14. Which of the following combinations correctly describes the relationship between foreign currency transactions, exchange rate changes, and foreign exchange gains and losses? Type of Transaction Foreign Currency Foreign Exchange Gain /Loss A. Export sale Appreciates Loss B. Import purchase Appreciates Gain C. Import purchase Depreciates Gain D. Export sale Depreciates Gai
The exchange loss/gain due to a transaction exposure is estimated while O a. Converting a foreign currency into a domestic currency O b. Quoting a price for a foreign currency transaction O c. Entering into a transaction in foreign exchange O d. Verifying the fluctuation in the exchange rate
If the foreign operations reports in the currency of hyperinflationary economy, assets and liabilities are translated at Group of answer choices Average rate Exchange rate on date of transaction Forward rate Closing rate
what's the required condition for a country's Current Acoount Balance to improve after the devaluation of its currency. explain.
Title: Identification Things to do: 1. A second function of the foreign exchange market is to provide exchange possibility that unpredicted changes future exchange rates adverse consequences for the firm. insurance against risk, which is the in will have exchange rate is the rate foreign exchange dealer 2. The at which a converts currency into another one currency on a particular day. 3. The value of a is determined by the interaction between the demand and supply of that currency relative to the demand and supply of other currencies. 4. A parties agree exchange occurs to exchange currency when two and execute the deal at some specific date in the future. 5. rates governing such future transactions are referred to as forward exchange rates. 6. Changes in be problematic for an business. exchange rates can international 7. A is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. 8. When a firm enters into a it is taking out possibility…
Under a flexible exchange rate system, a decrease in the value of a domestic currency in terms of foreign currencies is referred to as Answer 1. an appreciation. 2. a depreciation. 3. a devaluation. 4. a revaluation.