The wealth effect stems from the idea that a higher price levela. increases the real value of households’ money holdings.b. decreases the real value of households’ money holdings.c. increases the real value of the domestic currency in foreign-exchange markets.d. decreases the real value of the domestic currency in foreign-exchange markets.

In 2002 it looked like the Argentinean government might default on its debt (which eventually it did). The open-economy macroeconomic model predicts that this should have   A.  raised Argentinean real interest rates and caused the Argentinean currency to appreciate. B.  raised Argentinean real interest rates and caused the Argentinean currency to depreciate. C.  lowered Argentinean real interest rates and caused the Argentinean currency to depreciate. D.  lowered Argentinean real interest rates and caused the Argentinean currency to appreciate.

The currency of the United States is:   a. backed dollar for dollar by gold.   b. backed by a gold cover of 50 percent.   c. not backed by any precious metal.   d. backed by the government's silver reserves.   e. backed by the government's gold and silver reserves

Consider the U.S. economy. A decrease in the price level causes the aggregate quantity of goods and services demanded to increase because a. Wealth falls, interest rates rise, and the dollar depreciates b. Wealth falls, interest rates rise, and the dollar appreciates. c. Wealth rises, interest rates rise, and the dollar appreciates d. Wealth rises, interest rates fall, and the dollar depreciates e. None of the above.

Q1-4 Suppose that a Japanese investor buys a Canadian stock with cash. For Canada, this counts as a:   a. current account credit, current account debit. b. financial account debit, financial account credit. c. capital account debit, capital account credit. d. financial account credit, financial account credit.

In a fixed exchange rate system, ..... A. the International Monetary Fund determines exchange rates. B. market forces play a role in determining the fixed value of a currency. C. market forces and the country's stock of gold determine its exchange rate. D. a central bank affects the value of a currency by changing its foreign exchange reserves.

International Finance and the Exchange Rate - End of Chapter Problem a. Please select each piece of information needed to calculate a real exchange rate. domestic price in foreign currency nominal exchange rate foreign price in foreign currency domestic price in home currency b. A higher real exchange rate implies that Odomestic goods have become cheaper relative to foreign goods. the domestic currency is depreciating. 4. foreign goods have become more expensive relative to domestic goods. domestic goods have become more expensive relative to foreign goods.

Refer to Figure 13-1. Ceteris paribus, a decrease in the value of the domestic currency relative to foreign currencies would be represented by a movement from AD1 to AD2. AD2 to AD1. point A to point B. point B to point A.

4) Suppose the price level in India is 9,500, the price level in the United States is 140, and the price level in Brazil is 750. Suppose the current nominal exchange rates are 75 Indian rupee per dollar and 5 Brazilian real per dollar. Calculate the real exchange rates (rounded to two decimal places) between each pair of countries. Note that you will have to first calculate the nominal exchange rate between Brazil and South India before calculating the real exchange rate between those two countries. (4

In Minland, the central bank lowers the interest rate from 5 per cent a year to 3 per cent a year. a.Describe in detail the steps that the Bank of Minland must follow to make the interest rate fall? b.Describe the effects of the lower interest rate on consumption expenditure and investment. c. Describe the effects of the lower interest rate on the exchange rate of the Minland dollar for the UK pound. d.Describe the effects of the change in the Minland dollar exchange rate on Minland’s net exports. e.Explain whether the change in the interest rate shifts or brings a movement along Minland’s interest-sensitive expenditure curve. f.Explain the full set of ripple effects of the interest rate cut ending with the changes in real GDP and the price level.