Foreign Exchange Market

In an agreement to exchange dollars for euros in three months at a price of $0.90 per euro, the price is the ________.

• spot exchange rate

• money exchange rate

• forward exchange rate

• fixed exchange rate

When the value of the British pound changes from $1.25 to $1.50, the pound has ________ and the Canadian dollar has ________.

• appreciated; appreciated

• depreciated; appreciated

• appreciated; depreciated

• depreciated; depreciated

On January 25, 2009, one Canadian dollar traded on the foreign exchange market for about 49.0 Indian rupees. Thus, one Indian rupee would have purchased about ________ Canadian dollars.

• 0.02

• 1.20

• 7.00

• 49.0

Everything else held constant, when a country's currency appreciates, the country's goods abroad become ________ expensive and foreign goods in that country become ________ expensive.

• more; less

• more; more

• less; less

• less; more

Higher tariffs and quotas cause a country's currency to ________ in the ________ run, everything else held constant.

• depreciate; short

• appreciate; short

• depreciate; long

• appreciate; long

Everything else held constant, increased demand for a country's ________ causes its currency to appreciate in the long run, while increased demand for ________ causes its currency to depreciate.

• imports; imports

• imports; exports

• exports; imports

• exports; exports

When Canadians or foreigners expect the return on ________ assets to be high relative to the return on ________ assets, there is a higher demand for dollar assets and a correspondingly lower demand for foreign assets.

• dollar; dollar

• dollar; foreign

• foreign; dollar

• foreign; foreign

________ in the domestic interest rate causes the demand for domestic assets to increase and the domestic currency to ________, everything else held constant.

• An increase; appreciate

• An increase; depreciate

• A decrease; appreciate

• A decrease; depreciate

An increase in the foreign interest rate causes the demand for domestic assets to shift to the ________ and the domestic currency to ________, everything else held constant.

• right; appreciate

• right; depreciate

• left; appreciate

• left; depreciate

________ in the expected future domestic exchange rate causes the demand for domestic assets to shift to the ________ and the domestic currency to depreciate, everything else held constant

• An increase; right

• An increase; left

• A decrease; right

• A decrease; left