Question

"Fluctuations in exchange rates, other things remaining the same, create a situation in which money buys...

"Fluctuations in exchange rates, other things remaining the same, create a situation in which money buys the same amount of goods and services in different currencies." What does the previous statement describe? Will these fluctuations occur in the short run or the long run?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The previous statement describes the process through which exchange rate parity is achieved across countries. This happens when the currency exchange market is allowed to operate freely, the exchange rate fluctuations finally result in a situation where the same amount of currency buys the same goods and services across countries. These fluctuations occur only in the short run and in the long run the exchange rates stabilise to achieve exchange rate parity.

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
If the Fed decreases interest rates, other things remaining the same, foreigners demand ____ dollars thereby...
If the Fed decreases interest rates, other things remaining the same, foreigners demand ____ dollars thereby ____ the price of the dollar on the foreign exchange market. Question 48 options: 1) more; increasing. 2) more; decreasing. 3) fewer; increasing. 4) fewer; decreasing. Question 49 (2 points) The relationship between the AS-AD model and the Phillips curve points out that as aggregate demand decreases, the unemployment rate Question 49 options: 1) decreases and the inflation rate rises. 2) increases and the...
1) Consider the following statement: “Exports pay for imports. Yet in 2012 the nations of the...
1) Consider the following statement: “Exports pay for imports. Yet in 2012 the nations of the world exported about $540 billion more of goods and services to the United States than they imported from the United States.” The apparent inconsistency of these two statements can be resolved by recognizing that a) these comparisons use different measures of exports and imports. b) in the short run, exports pay for imports, but in the long run a country can import more goods...
40. Under perfect capital mobility and fixed exchange rates, expansionary _____ is a futile attempt because...
40. Under perfect capital mobility and fixed exchange rates, expansionary _____ is a futile attempt because the _____. a. fiscal policy; LM curve effectively is vertical. b. monetary policy; LM curve effectively is the same as the FE curve. c. fiscal policy; interest rate does not change. d. monetary policy; IS curve will shift to the left. 41. The J curve shows that: a. devaluation is more likely to improve the trade balance in the short-run than in the long-run....
1. When interest rates in Australia decrease relative to interest rates in other countries, we may...
1. When interest rates in Australia decrease relative to interest rates in other countries, we may see Australian dollar Select one: a. depreciation and a decrease in net exports. b. appreciation and an increase in net exports. c. appreciation and a decrease in net exports. d. depreciation and an increase in net exports. 2. We can expect an increase in the value (appreciation) of the Australian dollar relative to Indian rupiah when Select one: a. Indian economy is going into...
Predicting Exchange Rate Movements Whether international businesses are concerned with the long-term profitability of foreign investment,...
Predicting Exchange Rate Movements Whether international businesses are concerned with the long-term profitability of foreign investment, export opportunities, the price competitiveness of foreign imports, or the short-term foreign exchange transactions that occur on a daily basis, the firm must pay attention to exchange rate movements. These movements can affect whether a deal results in a profit or a loss. Exchange rate movements are extremely difficult to predict, though businesses need some forecasting ability to plan. A number of theories, methods,...
Instructions: 1.Pay attention to the different labels used in the charts. If you see an AD-AS...
Instructions: 1.Pay attention to the different labels used in the charts. If you see an AD-AS graph, that means you are to describe what happens in the US economy as a whole, or in the aggregate market, the market of ALL goods and services in the US. Unless noted otherwise, you are to describe both the short-run and long-run impacts. 2.On the other hand, if you see the regular S and D model, you are to describe the impact on...
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...
1) Other things held constant, which strategy would tend to reduce the cash conversion cycle? a....
1) Other things held constant, which strategy would tend to reduce the cash conversion cycle? a. placing larger orders for raw materials to take advantage of price breaks b. maintaining the same level of receivables as sales decline c. Increasing the inventory conversion period d. lengthening the payables deferral period 2) Your company has been offered credit terms of 3/30, net 90 days. What will the nominal annual cost of trade credit be if you pay 100 days after the...
1. When the U.S. dollar depreciates relative to other major currencies, what would happen to exports...
1. When the U.S. dollar depreciates relative to other major currencies, what would happen to exports and imports of goods and services from and to the United States? Is it good for domestic firms exporting goods and services? Is it good for domestic portfolio investors who may purchase foreign assets? 2. When the Federal Reserve conducts an expansionary monetary policy (increasing its monetary base), what would happen to the domestic money supply? Does this also affect the supply of dollar...
1. Exchange rates are equalized in different locations due to: a. arbitrage. b. government intervention in...
1. Exchange rates are equalized in different locations due to: a. arbitrage. b. government intervention in foreign exchange markets. c. free trade in goods and services. d. the actions of importers and exporters. 2. How can one profit through arbitrage if the dollar per euro exchange rate in London is $2 per pound while in New York is $1.95 per pound? a. Buy dollars in New York and sell them in London b. Buy pounds in London and sell them...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT