Economics MCQs

Page No. 197

The asset market approach views exchange rates as being determined mainly by ?


athe use of import tariffs and quotas by governments

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b the current account balance of each country

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cthe relative growth rate of national output between countries

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defforts of investors to balance their portfolios among financial assets denominated in different currencies

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View Answer efforts of investors to balance their portfolios among financial assets denominated in different currencies

The assets market approach is most helpful in explaining ?


awhy exchange rates remain quite stable

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bwhy governments change their money supplies

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c long term exchange rate movements

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dshort term exchange rate movements

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View Answer short term exchange rate movements

Consulting firms that use large-scale econometric models to forecast exchange rate movements are engaging in ?


ajudgmental analysis

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bfundamental analysis

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ctechnical analysis

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dnontechnical analysis

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View Answer fundamental analysis

Suppose that the purchasing power parity estimate of the dollar/euro exchange rate is $1.30 per euro, and the current spot rate is $1.3 8 per euro. Comparing these two exchange rates from a long-run viewpoint you would ?


aanticipate the dollar to depreciate against the euro

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banticipate the dollar to appreciate against the euro

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canticipate the dollar’s exchange rate against the euro to remain constant

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dhave no anticipation concerning future movements in the dollar/euro exchange rate

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View Answer anticipate the dollar to appreciate against the euro

Suppose that rising U.S income leads to higher sales and profits in the United States This would likely result in ?


a increasing portfolio investment into the United States

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bdecreasing portfolio investment into the United States

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c increasing direct investment into the United States

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d decreasing direct investment into the United States

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View Answer increasing direct investment into the United States

Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium economic theory suggests that the nation’s balance of payments would move into a surplus position if there occurred in the nation a (an) ?


aincrease in the money demand

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bdecrease in the money demand

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cincrease in the money demand

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d None of the above

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View Answer increase in the money demand

Which example of market expectations causes the dollar to depreciate against the yen – expectation that the U.S economy will have ?


afaster growth than Japan

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bhigher future interest rates than Japan

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cmore rapid money supply growth than Japan

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dlower inflation rates than Japan

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View Answer faster growth than Japan

Under a system of floating exchange rates relatively high productivity and low inflation rates in the United States results in a (an) ?


aincrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar

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bincrease in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar

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cdecrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar

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ddecrease in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar

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View Answer increase in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar

Under a system of floating exchange rates relatively low productivity and high inflation rates in the United States results in a (an) ?


a increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar

✓


bincrease in the demand for foreign currency an increase in the supply of foreign currency and a appreciation in the dollar

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cdecrease in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar

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ddecrease in the demand for foreign currency and increase in the supply of foreign currency and a appreciation in the dollar

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View Answer increase in the demand for foreign currency a decrease in the supply of foreign currency and a depreciation in the dollar

Given a system of floating exchange rates rising income in the United States would trigger a (an) ?


a increasing in the demand for imports and an increasing in the demand for foreign currency

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bincrease in the demand for imports and decrease in the demand for foreign currency

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cdecrease in the demand for imports and an increase in the demand for foreign currency

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ddecrease in the demand for imports and a decrease in the demand for foreign currency

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View Answer increasing in the demand for imports and an increasing in the demand for foreign currency

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