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Question
Assume that a country is at full employment and wants to improve its trade deficit by
devaluing its currency. Using the absorption approach which of the following methods will improve the trade deficit?
I. Decrease government spending
II. Decrease consumption taxes
III. Decrease income taxes
a. I only
b. II only
c. II and III
d. I, II, and III
Answer
This answer is hidden. It contains 1 characters.
Related questions
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Risk premium equals to:a. expected premium minus forward premium.b. expected premium plus forward premium.c. forward premium minus expected premium.d. exchange rate premium plus forward premium.
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If a bicycle costs $200 in the U.S. and 50 Swedish kronor in Sweden and the exchange rate is 0.25 Swedish krona per dollar, then the Swedish krona is:
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c. Overvalued relative to PPP.
d. Not enough information to find answer.
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If prices in the U.K. are rising slower than prices in the U.S. then
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The equivalence of the exchange rate to the ratio of price levels between two countries is referred to as the:
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b. Relative PPP
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d. None of the above
Q:
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If a currency has appreciated more than the price differential between two countries as implied by PPP, then a currency is overvalued.
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In the presence of purchasing-power parity, if five pesos exchange for one dollar and a new smartphone sells for $100 in Dallas, then the identical smartphone in Mexico City should cost:
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Q:
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a. targets a domestic inflation rate within a certain range of values.
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c. coordinates monetary and fiscal policies with ones trading partners so as to achieve particular international economic outcomes.
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Q:
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Q:
Under the flexible exchange rate regime, which of the following variables in the monetary approach becomes zero and is dropped out of the equation?
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According to the monetary approach to the balance of payments, which of the following economic events would help a country to resolve its balance of trade deficit?
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Considering the internal balance in an economy, which of the following could lead to lower interest rate and higher income?
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In foreign exchange forecasting, what is a good forecast?
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c. When the forecast is high.
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Q:
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Q:
Suppose that the 1-year forward rate of dollar per pound is $1.32, the current spot rate ($/pound) is $1.20, and the expected future spot rate ($/pound) is $1.40. The expected premium on the pound is:
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Q:
A U.S. firm has a 1 million payment due to a Dutch firm in 90 days. The current spot rate is $1.00 per euro, and the 90-day forward rate is $1.11. Ben forecasts that the spot rate in 90 days will be $0.99. Jerry forecasts that the spot rate will be $1.12 in 90 days. The actual spot rate in 90 days turns out to be $1.10. Whose advice, between Ben and Jerry, will save the companys money?
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Q:
Suppose that the 1-year forward rate of dollar per Swiss franc is $0.42, the current spot rate ($/SFr) is $0.40, and the expected future spot rate ($/SFr) is $0.45. The forward premium equals to:
a. 7.5%
b. 5%
c. 6.67%
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