Question

ASAP (1) Given the PPP relationship between real exchange rates, nominal exchange rates, and relative inflation...

ASAP
(1)
Given the PPP relationship between real exchange rates, nominal exchange rates, and relative inflation rates, which of the following would we expect to occur due to an increase in foreign prices, given fixed nominal exchange rates.


Real appreciation, if home prices don’t change, meaning home goods are more competitive


Real depreciation, if home prices don’t change, meaning home goods are more competitive


Real appreciation, if home prices don’t change meaning home goods are less competitive


B and C

(2)

Suppose the spot dollar-euro exchange rate is $1.10/€, and the 60-day forward rate is $1.14/€.


The dollar is selling at a forward discount


The Euro is selling at a forward discount


The Euro is selling at a forward premium


The dollar is selling at a forward premium


A and C


B and D


(3)
Increasing unit labor cost (dollar value of labor it takes to produce a unit) implies

Increased competitiveness


Reduced competitiveness


A real exchange rate depreciation


A nominal exchange rate appreciation


Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Given the PPP relationship between real exchange rates, nominal exchange rates, and relative inflation rates, which of the following would we expect to occur due to an increase in foreign prices, given fixed nominal exchange rates.

Ans: Real depreciation, if home prices don’t change, meaning home goods are more competitive.

2. Suppose the spot dollar-euro exchange rate is $1.10/€, and the 60-day forward rate is $1.14/€.

Ans: A and C

3. Increasing unit labor cost (dollar value of labor it takes to produce a unit) implies

Ans: A nominal exchange rate appreciation

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
According to a textbook for relative PPP “It asserts that prices and exchange rates change in...
According to a textbook for relative PPP “It asserts that prices and exchange rates change in a way that preserves the ratio of each currency’s domestic and foreign purchasing powers. If the U.S. price level rises by 10 percent over a year while Europe’s rises by only 5 percent, for example, relative PPP predicts a 5 percent depreciation of the dollar against the euro. The dollar’s 5 percent depreciation against the euro just cancels the 5 percent by which U.S....
Differentiate the nominal and real exchange rate between the dollars and euros. Do the two exchange...
Differentiate the nominal and real exchange rate between the dollars and euros. Do the two exchange rate move together? Why is appreciation or depreciation of real exchange rates important?
Question 1 (1 point) Which of the following can cause relative PPP to NOT hold in...
Question 1 (1 point) Which of the following can cause relative PPP to NOT hold in the short run? Question 1 options: frictionless markets state-sponsored monopolies types of labor and unique skill sets than can only be found in one area or certain areas shipping costs Question 2 (1 point) If relative PPP holds, absolute PPP must hold. Question 2 options: True False Question 3 (1 point) In 2019, the US had the highest nominal GDP in the world, before...
The table below shows the information for exchange rates, interest rates and inflation rates in the...
The table below shows the information for exchange rates, interest rates and inflation rates in the US and Germany. Answer the following questions Current spot rate: $1.60/€ One-year forward rate: $1.58/€ Interest rate in the US: 2% Interest rate in Germany: 4% Inflation rate in the US: 2% Inflation rate in Germany: 3% (a) If you borrowed $1,000 for 1 year, how much money would you owe at maturity? (b) Find the 1-year forward exchange rate in $ per €...
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...
# exchange rate 1. Suppose the Federal Reserve Board unexpectedly decreases interest rates in the United...
# exchange rate 1. Suppose the Federal Reserve Board unexpectedly decreases interest rates in the United States. How will this action affect the value of the dollar in the international dollar market?(Will the dollar appreciate, depreciate or stay the same?) Graphically show the impact on the international dollar market. Label all curves and axis. 2) Rate Spot. 0.7570 1 month 0.7574 3 months. 0.7570 6 months. 0.7569 1 Year 0.7674 2 years. 0.7611 3 years. 0.7668 4 years. 0.7730 The...
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...
1. USD/Brazilian Real = 3.949, USD/Australian Dollar = 1.5, USD/Chinese Yuan = 5.817 What is the...
1. USD/Brazilian Real = 3.949, USD/Australian Dollar = 1.5, USD/Chinese Yuan = 5.817 What is the Australian Dollar/Chinese Yuan cross rate? Enter your answer rounded off to THREE decimal points. 2. Suppose the exchange rate for the Swiss Franc is quoted as SF 1.10 in the spot market and SF 0.97 in the 90-day forward market. Is the dollar selling at a premium or a discount relative to the franc? PREMIUM OR DISCOUNT 3. Suppose the exchange rate between U.S....
1. Under a floating exchange rate system, everything remaining constant, an increase in European exports to...
1. Under a floating exchange rate system, everything remaining constant, an increase in European exports to Japan is most likely to result in: a. a decrease in the demand for euro in the foreign exchange market. b. a decrease in the supply of euro in the foreign exchange market. c. an appreciation of the Japanese yen vis-à-vis the euro. d. an appreciation of the euro vis-à-vis the Japanese yen. 2. Economists believe that the _____ determines the price level in...
Scenario 1: You have to estimate the expected exchange rates one year from now between your...
Scenario 1: You have to estimate the expected exchange rates one year from now between your home currency and the other currencies of the major other countries that you deal with in terms of both imports and exports. The reason is that increases in the values of other currencies compared to the U.S. Dollar may impact your imports negatively, whilst it may on the other hand, be good for exports. To do this estimate, you obtain the following spot exchange...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT