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Question 1


  2.  

    Assume that the income levels in U.K. start to

    rise, while U.S. income levels remain unchanged. This will place ____ pressure

    on the value of British pound. Also, assume that U.S. interest rates rise, while

    the British pound remains unchanged. This will place ____ pressure on the value

    of British pound.

    Answer

    downward;
    downward

    upward;
    downward

    upward;
    upward

    downward;
    upward

1 points  

Question 2


  2.  

    If a country experiences an increase in

    interest rates relative to U.S. interest rates, the inflow of U.S. funds to

    purchase its securities should ____, the outflow of its funds to purchase U.S.

    securities should ____, and there is ____ pressure on its currency’s equilibrium

    value.

    Answer

    increase; decrease;
    downward

    decrease; increase;
    upward

    increase; decrease;
    upward

    decrease; increase;
    downward

    increase; increase;
    upward

1 points  

Question 3


  2.  

    Assume that the U.S. places a strict quota on

    goods imported from Chile and that Chile does not retaliate. Holding other

    factors constant, this event should immediately cause the U.S. demand for

    Chilean pesos to ____ and the value of the peso to

    ____.

    Answer

    increase;
    increase

    increase;
    decline

    decline;
    decline

    decline;
    increase

1 points  

Question 4


  2.  

    When the “real” interest rate is relatively

    low in a given country, then the currency of that country is typically expected

    to be:

    Answer

    weak, since the country’s quoted
    interest rate would be high relative to the inflation
    rate.

    strong, since the country’s quoted
    interest rate would be low relative to the inflation
    rate.

    strong, since the country’s quoted
    interest rate would be high relative to the inflation
    rate.

    weak, since the country’s quoted
    interest rate would be low relative to the inflation
    rate.

1 points  

Question 5


  2.  

    The phrase “the dollar was mixed in trading”

    means that:

    Answer

    the dollar was strong in some
    periods and weak in other periods over the last month.

    the volume of trading was very high
    in some periods and low in other periods.

    the dollar was involved in some
    currency transactions, but not others.

    the dollar strengthened against
    some currencies and weakened against
    others.

 
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