Question

4. An undervalued currency acts as a(n) ____ on exports and a(n) _____ to imports. subsidy, benefit increase, reduction increase, increase tax, subsidy

5. Which theory uses interest rates to estimate a forward rate a. Purchasing power parity b. Unbias forward estimator c. Interest rate parity d. International Fisher Effect

6. A weak dollar will a. force American exporters to raise their foreign currency prices enable American importers to reduce their dollar costs c. enable American exporters to improve their profit margins d. cost American exporters market share abroad

Answer 1

4. An undervalued currency acts as a(n) Subsidy on exports and a(n) tax to imports. when a currency is undervalued then market try to take maximum benefit by purchasing from the undervalued country which acts as subsidy to exports but when the country wants to import it will act as a burden on the country's currency

5. Option C Interest Rate Parity.

Interest rate parity

Interest rate parity is a theory that deals with the relationship between the interest rates of two given currencies and the spot and forward exchange rates between the currencies

6. Option C. enable American exporters to improve their profit margins. the profit margins will improve because of the fact that people tend to purchase more from US Market because of weak dollar.