Question

1. In the long run, the most important determinant of the exchange rate between the US...

1. In the long run, the most important determinant of the exchange rate between the US dollar and the Euro is

a. the prices of goods in the US and in Europe.

b. economic growth in the United States.

c. the flow of financial capital.

d. the precautionary motive.

e. speculation.

2. An increase in the U.S. demand for the Euro causes

a. an increase in the U.S. dollar price of a Euro.

b. the Euro to appreciate.

c. the U.S. dollar to depreciate.

d. US imports from Europe to be relatively more expensive.

e. All of the above.

Homework Answers

Answer #1

Answer 1 - correct option is A

Reason - in long run the most important determinant of exchange rate between two countries is determined by purchasing power parity hence the exchange rate between US dollars and Euro is will be determined by price of goods in US and Europe

Answer 2 - correct option is E

Reason - As euro currency weakens thee dollar currency which means that as there is fall in value of euro , each dollar buys more euro ,currency dollar price of europian goods starts falling .As a result of which American buys more Euro currency and assets and thus increase the quantity demanded fkr euro by Americans

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider the Euro-dollar exchange rate (nominal exchange rate = Euros/$US). For each of these examples, use...
Consider the Euro-dollar exchange rate (nominal exchange rate = Euros/$US). For each of these examples, use a supply/demand diagram for the foreign exchange market to show the impact on the exchange rate. In each case, does the exchange rate appreciate or depreciate? a. A debt crisis in Europe causes investors holding Euro denominated securities to move to dollar denominated securities. b. The European Central Banks raises interest rates, attracting inflows from U.S. financial investors into European markets. c. The European...
Right now, the US dollar is relatively close in value to the euro ($1.10 = 1...
Right now, the US dollar is relatively close in value to the euro ($1.10 = 1 e). There is some speculation that we may be seeing some inflation in the United States in the near future. If the rate of inflation stays the same in the European Union and increases in the US, what can we expect will happen to the exchange rate between the Euro and the US dollar? Moreover, suppose that central banks neither in the United States...
In each case below, does the U.S. exchange rate appreciate or depreciate, and what happens to...
In each case below, does the U.S. exchange rate appreciate or depreciate, and what happens to the net export of U.S.? a. A drought in Russia destroys the wheat crop, resulting in increased purchases of wheat from the United States. The U.S. exchange rate will _________________ and net export ______________.     (Click to select)  depreciate; may increase, decrease, or stay unchanged  depreciate; will decrease  appreciate; will increase  appreciate; may increase, decrease, or stay unchanged  depreciate; will increase  appreciate; will decrease b. Federal Reserve conducts expansionary monetary policy,...
Consider the model of long run exchange rate determination. It assumed prices were flexible and income...
Consider the model of long run exchange rate determination. It assumed prices were flexible and income is fixed. There are two countries, the US and Europe. There is no expectation of price stability. Determine the effects of the following events on the US exchange rate (E$/€ )with Europe. a. Europe increases its money supply by twenty percent. b. There is economic growth of 4 percent in the US. At the same time, the US increases the money supply by 8...
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($...
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($ per Euro) will make the dollar less expensive to foreigners If iD= 10% and iF = 5%, for investors to be indifferent between holding both one year financial assets, they should expect expect that over the next year the domestic currency will appreciate. A trade deficit implies that that country will require a surplus in the financial account compensating that deficit. An increase in...
According to uncovered interest rate parity, if the interest rate in Japan decreases, all else equal,...
According to uncovered interest rate parity, if the interest rate in Japan decreases, all else equal, ________. Select one: a. Japanese yen is expected to depreciate against U.S dollar b. U.S. dollar is expected to depreciate against Japanese yen c. the exchange rate of Japanese yen against U.S. dollar remains unchanged d. U.S. dollar is expected to appreciate against Japanese yen If U.S. residents increased their imports of cheese from Switzerland, the Swiss central bank would need to ________ in...
Explain the probable result of the following events on the currency exchange rates below (assume all...
Explain the probable result of the following events on the currency exchange rates below (assume all other factors stay constant). A popular movie released in the United States, but set in Spain significantly increases the number of U.S. tourists visiting Spain.     The euro will   (Click to select)   stay constant   appreciate   depreciate  relative to the U.S. dollar. The Federal Reserve undertakes expansionary monetary policy by cutting interest rates.     The U.S. dollar will   (Click to select)   stay constant   depreciate   appreciate  relative to other foreign currencies. A destructive typhoon in the Philippines increases...
6) Assume that U.S. and British investors require a real return of 3%. If the nominal...
6) Assume that U.S. and British investors require a real return of 3%. If the nominal U.S. interest rate is 16%, and the nominal British interest rate is 13%, then according to the Real Interest Parity (RIP) as well as the Uncovered Interest Parity (UIP), the British inflation rate is expected to be about _________ the U.S. inflation rate, and the British pound is expected to _________. A. 3 percentage points above; appreciate by about 3% B. 3 percentage points...
The exchange rate between the U.S. dollar and other currencies is dependent in the short run...
The exchange rate between the U.S. dollar and other currencies is dependent in the short run on all of the following EXCEPT A. the desirability of U.S. financial securities. B. the law of one price. C. the foreign demand for​ U.S.-produced goods. D. the level of interest rates in the United States relative to foreign interest rates.
Q. Use the monetary approach in the long run to answer this question. Suppose the Bank...
Q. Use the monetary approach in the long run to answer this question. Suppose the Bank of Japan decides to increase its money supply in order to fight continued deflation in the economy. If we assume that no other policy response takes place in the US, what would happen to the US dollar-Japanese yen exchange rate E$/¥? Will the dollar appreciate or depreciate against the Japanese yen? Explain. (10 pts)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT