Question

Label each of the following statements true, false, or uncertain. Explain your choice carefully. a. When...

Label each of the following statements true, false, or uncertain. Explain your choice carefully.

a. When domestic inflation equals foreign inflation, the real exchange rate is fixed.

b. A devaluation is an increase in ? when the nominal exchange rate ? is defined as the price of the domestic currency in terms of foreign currency.

c. A change in the expected future exchange rate changes the current exchange rate.

d. Because economies tend to return to their natural level of output in the medium run, it makes no difference whether a country chooses a fixed or flexible exchange rate.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

a) False,

when domestic inflation = foreign inflation , real exchange rate is not fixed as fixed exchange rate means that exchange rate will not move when inflation changes

b ) true

Depreciation , increase in nominal exchange rate means that the price of foreign currency has increased in terms of domestic currency i.e domestic currency has become weak relative to foreign currency .

c ) True

changes in expectation about the future exchange rate will effect current exchange rate as demand and supply of currencies will be affected causing the current rate to change .

d) False

the statement is false , as fixed or flexible exchange rate affects the growth rate by affecting the deficits / surplus

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
Label each of the following statements true, false, or uncertain. Explain your choice carefully. (a)The present...
Label each of the following statements true, false, or uncertain. Explain your choice carefully. (a)The present discounted value of a stream of returns can be calculated in real or nominal terms. (b)The higher the one-year interest rate, the lower the present discounted value of a payment next year. (c) One-year interest rates are normally expected to be constant over time. (d) Bonds are a claim to a sequence of constant payments over a number of years. (e) The yield curve...
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...
True or false and explain please. 1.Like gold standard, the currency board (foreign exchange rate policy)...
True or false and explain please. 1.Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail. 2.For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits. 3.For a country with deficit in current account, devaluation of domestic currency will help reduce the deficit immediately. 4.In a nation which pegs its currency to the U.S. dollar at fixed exchange rates, it is very likely that the central bank must...
1. Using the information in this chapter, label each of the following statements true, false, or...
1. Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly. a. The nominal interest rate is measured in terms of goods; the real interest rate is measured in terms of money. b. As long as expected inflation remains roughly constant, the movements in the real interest rate are roughly equal to the movements in the nominal interest rate. c. The nominal policy interest rate was at the zero lower bound in...
true or false: ) 1. Like gold standard, the currency board (foreign exchange rate policy) is...
true or false: ) 1. Like gold standard, the currency board (foreign exchange rate policy) is doomed to fail. (2) You are to buy ¥200m with Australian dollars through a forward contract maturing in 6 months. The forward price is F6(¥/A$)=100. If the spot rate at the maturity is S6(¥/A$)=80. You have a loss in the forward trading. (3) For euro to become a world currency, it is necessary that the eurozone countries run long-term trade deficits. (4) For a...
Question 1. Answer true or false or uncertain, please explain briefly a) Consider a country that...
Question 1. Answer true or false or uncertain, please explain briefly a) Consider a country that adopts the fixed exchange rate system and uses monetary policy to sustain the fixed exchange rate. —To counter a speculative attack on its currency,the central bank must tighten monetary policy. Answer true,false,or uncertain.Please briefly explain your answer: b) —In a small open economy,the domestic real interest rate can be higher than the world real interest rate. Answer true,false,or uncertain.Please briefly explain your answer.
Determine whether each of the following statements is true, false, or uncertain. Explain your answer carefully....
Determine whether each of the following statements is true, false, or uncertain. Explain your answer carefully. Include an IS-LM diagram in your explanations for each part. a. An exogenous increase in saving raises investment b. An increase in government spending reduces disposable income c. An exogenous reduction in money demand raises investment spending but reduces saving d. Because of the crowding out effect, an increase in government spending may lead to no change in equilibrium income e. The greater the...
1. For each of the following statements, state if it is True or False and carefully...
1. For each of the following statements, state if it is True or False and carefully explain your response. (1 point for correctly stating T or F, 2 points for explanation) (15 pts) a) According to classical theory, in the long run, a decrease in the growth rate of the money supply leads to an increase in the real interest rate, but no change in the nominal interest rate. b) An increase in workers’ unions will likely increase frictional unemployment....
1. Using the information in this chapter, label each of the following statements true, false, or...
1. Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly. a. U.S.GDPwas32timeshigherin2014thanitwasin1960. b. When the unemployment rate is high, the participation rate is also likely to be high. c. The rate of unemployment tends to fall during expansions and rise during recessions. d. IftheJapaneseCPIiscurrentlyat108andtheU.S.CPIisat 104, then the Japanese rate of inflation is higher than the U.S. rate of inflation. e. The rate of inflation computed using the CPI is a better...
Which of the following statements are true? Which are false? Explain (for each statement) If investors...
Which of the following statements are true? Which are false? Explain (for each statement) If investors expect the currency to appreciate in the future and demand the currency today, the central bank may run out of reserves while trying to prevent currency from appreciating. Unlike money supply targeting, the crawling peg policy uses the exchange rate as a nominal anchor.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT