Question

QUESTION 9 If the purchasing power parity predicted nominal exchange rate is greater than actual nominal...

QUESTION 9

  1. If the purchasing power parity predicted nominal exchange rate is greater than actual nominal exchange rate, then

a.

the real exchange rate is greater than one

b.

the real exchange rate equals one

c.

the real exchange rate is less than one

d.

nothing can be said about the real exchange rate

QUESTION 10

  1. If the indirect quote for the Polish zloty versus the U.S. dollar is 4 zloty per 1 dollar, then the direct quote would be .25 dollars per 1 zloty.

True

False

QUESTION 11

  1. If the indirect quote exchange rate increases for a currency, the currency value rises.

True

False

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

If the purchasing power parity predicted nominal exchange rate is greater than actual nominal exchange rate, then:

c. the real exchange rate is less than one

the nominal exchange rate shows the exchange rate of currency between countries while real exchange rate shows the exchange of goods and services.

If the indirect quote for the Polish zloty versus the U.S. dollar is 4 zloty per 1 dollar, then the direct quote would be .25 dollars per 1 zloty.

true

because direct quote and indirect quote are inverse of each other. if indirect quote for 4 zloty is 1 U.S dollar than the direct quota will be 1 zloty = 1/4 =.25 dollar mean if in indirect quote with 1 U.S. dollar we are getting 4 zloty than in direct quote with 1 zloty we will get 0.25 dollar.

If the indirect quote exchange rate increases for a currency, the currency value rises.

False

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The important implication of purchasing power parity theory (for our purposes) is in regard to nominal...
The important implication of purchasing power parity theory (for our purposes) is in regard to nominal exchange rates (and changes in these rates). If purchasing power parity theory is true, we can use price differences (or price level differences more broadly) in two countries to make a prediction of what the nominal exchange rate “should be”. If a Big Mac costs 300 yen in Japan and $3.25 in the U.S., what should be the nominal exchange rate of yen per...
According to the theory of purchasing power parity, in a country with low inflation, a. nominal...
According to the theory of purchasing power parity, in a country with low inflation, a. nominal exchange rate will depreciate in response to its relatively low rate of inflation b. real exchange rate will adjust in response to inflation differentials. c. nominal exchange rate will adjust in response to inflation differentials so that the value of the real exchange rate is always one. d. has no effect on the nominal or real exchange rate what so ever.
1(a). (TRUE or FALSE?) The absolute purchasing power parity theory posits that exchange rates are determined...
1(a). (TRUE or FALSE?) The absolute purchasing power parity theory posits that exchange rates are determined by the differences in the prices of a given market basket of traded goods and services when there are no trade barriers. 1(b). (TRUE or FALSE?) In general, the diversification benefits are greater for a portfolio that contains both domestic and foreign securities, rather than domestic securities alone. 1(c). (TRUE or FALSE?) When a country’s currency weakens relative to the currencies of other countries,...
TRUE FALSE. If false CORRECT the wrong word/words An increase in the nominal exchange rate ($...
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...
Pricing foreign goods The nominal exchange rate is the price of one currency in terms of...
Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Foreign Currency Cost of One...
Foreign Exchange Markets Multiple-Choice: 1. The theory of purchasing-power parity indicates that if the price level...
Foreign Exchange Markets Multiple-Choice: 1. The theory of purchasing-power parity indicates that if the price level in the United States rises by 5% while the price level in Mexico rises by 6%, then a. the dollar appreciates by 1% relative to the peso. b. the dollar depreciates by 1% relative to the peso. c. the exchange rate between the dollar and the peso remains unchanged. d. the dollar appreciates by 5% relative to the peso. e. the dollar depreciates by...
This question is based on the concept of the Purchasing Power Parity (the idea that e-rate...
This question is based on the concept of the Purchasing Power Parity (the idea that e-rate should represent a valid comparison of prices across countries). Suppose that the price of Filet-o-Fish McDonald’s meal is 4.56 reals in Brazil, while it is 37 pesos in Mexico. The exchange rate of Brazilian real to Mexican peso is 13.6. How much would Filet-o-Fish meal cost in Mexico in Brazili
Question Set 7: Purchasing Power Parity and the Law of One Price The table below contains...
Question Set 7: Purchasing Power Parity and the Law of One Price The table below contains the price of a Big Mac in different countries in the world in January 2017[1]. You will use the information in the table to explain how Big Macs would be traded between countries if Big Macs could be traded among countries. Country Big Mac Price Purchasing Power Parity Exchange Rate Actual Exchange Rate Actual Price in U.S. Dollars United States $5.10 (U.S.) 1.0 U.S....
1. a Suppose the nominal exchange rate between the US dollar and the Canadian dollar is...
1. a Suppose the nominal exchange rate between the US dollar and the Canadian dollar is 1.25 (1 US dollar can buy 1.25 Canadian dollars). If the price of a basket of goods in the USA is 150 USD and in Canada is 175 CAD, then find out the real exchange rate between the USA and Canada. 1. b Interpret the value of the real exchange rate you found in 1. a 2.  Again suppose the nominal exchange rate between the...
1a.Suppose the nominal exchange rate between the US dollar and the Canadian dollar is 1.25 (1...
1a.Suppose the nominal exchange rate between the US dollar and the Canadian dollar is 1.25 (1 US dollar can buy 1.25 Canadian dollars). If the price of a basket of goods in the US is 150 USD and in Canada is 175 CAD, then find out the real exchange rate between the US and Canada. 1b. Interpret the value of the real exchange rate 2. Again suppose the nominal exchange rate between the US and Canada is 1.25 (1 US...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT