FOREX

If the exchange rate between the US dollar and the British pound changed from $2 to 1 pound to $3 per 1 pound, and domestic prices in both countries stayed the same, the United States dollar would

• depreciate, making US imports from Britain more expensive

• depreciate, making US imports from Britain cheaper

• appreciate, making US imports form Britain more expensive

• purchase 3 times more British goods than before the change occurred

• appreciate, making US imports from Britain cheaper

An appreciation of the US dollar on the foreign exchange market could be caused by a decrease in which of the following?

• US interest rates

• The United States consumer price index

• Demand for the dollar by US residents

• Exports from the US

• The tariff on goods imported into the US

Which of the following will cause the US dollar to depreciate relative to the euro?

• An increase in household income in the US

• An increase in the interest rates in the US

• An increase in household income in Europe

• A decrease in interest rates in Europe

• A decrease in price level in the US

The value of a country's currency will tend to appreciate if

• demand for the country's exports increases

• the country's money supply increases

• the country's citizens increase their travel abroad

• domestic interest rates decrease

• tariffs on the country's imports decrease

Which of the following is likely to occur following the depreciation of the US dollar?

• US imports will increase

• US exports will increase

• Demand for the US dollar will decrease

• US demand for foreign currencies will increase

• US goods will become more expensive in foreign markets

If Country Alpha has been experiencing a higher inflation rate than Country Beta over the past decade, which of the following is true?

• Alpha's currently will have appreciated relative to Beta's currency.

• Alpha's currency will have depreciated relative to Beta's currency

• Alpha will have had lower nominal interest rates than Beta

• Alpha will have had slower growth in the money supply than Beta

• Alpha's economy will have grown at a faster rate than Beta's

Assume that the world operates under a flexible exchange rate system. If the central bank of Mexico increases its money supply but other countries do not change theirs, Mexico's inflation rate and international value of the Mexican peso will most likely change in which of the following ways?

• Inflation Increase; Value of Peso Appreciate

• Inflation Increase; Value of Peso Depreciate

• Inflation Increase; No change in value of Peso

• Inflation Decrease; Value of Peso Appreciate

• Inflation Decrease; Value of Peso Depreciate

Under a flexible exchange-rate system, the Indian rupee will appreciate against the Japanese yen when

• India's inflation rate exceeds Japan's

• India has a trade deficit with Japan

• Japan's economy enters a recession, but India's does not

• Japan's money supply decreases while India's money supply increases

• Real interest rates in India increase relative to those in Japan

If the real interest rate in the US increases relative to that of the rest of the world, capital should flow

• into the US and the dollar will depreciate

• into the US and the dollar will appreciate

• out of the US and the dollar will depreciate

• out of the US and the dollar will appreciate

• out of the US and the value of the dollar will not change