Question

1. For a country with a currency that is weakening (valued low relative to other currencies), what will happen to the price of its exports and the price of its imports?

2. Unfavorable movements in exchange rates can be costly for businesses, so managers prefer that exchange rates be what?

3. The view that prices of financial instruments reflect all publicly available information at any given time is called what?

Answer 1

ANSWER -

Q1) This will make imports expensive and exports cheaper. Thus, net exports will increase.The value of the imports would rise as the domestic country has to pay more because of appreciation of foreign currency.

Q2) To avoid unfavorable movements in the exchange rate, managers prefer that exchange rate should be fixed. A stablle exchange rate enables a business to make plans that are more realistic.

Q3) Efficient market view is the view stating that all publicly available info will be reflected in the price of an instrument at any time.The view that financial instruments reflect all publicy available information at any given time is known as Efficient Market View.


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