QUESTION 25 Purchasing power parity implies that if inflation in China increases, then the nominal exchange rate between Chinese Yuan and NZ Dollar (CHyen/NZ$) will O decrease (i.e. a depreciation of the NZ$). O remain unchanged. O increase (i.e. an appreciation of the NZ$). O None of the above. QUESTION 26 If purchasing power parity were to hold even in the short run, then O the real exchange rate should equal one. O the real exchange rate should tend to decrease over time. O the nominal exchange rate should be stable over time. O the domestic and foreign price levels should be constant over time. QUESTION 27 Which of the following events will cause the value of the US dollar to appreciate? O A fall in the average prices of European goods. O Changing preferences of US consumers toward Asian products. O Increased demand for foreign assets by US investors. O Increased demand for US exports. Screenshot

QUESTION 25 Purchasing power parity implies that if inflation in China increases, then the nominal exchange rate between Chinese Yuan and NZ Dollar (CHyen/NZ$) will O decrease (i.e. a depreciation of the NZ$). O remain unchanged. O increase (i.e. an appreciation of the NZ$). O None of the above. QUESTION 26 If purchasing power parity were to hold even in the short run, then O the real exchange rate should equal one. O the real exchange rate should tend to decrease over time. O the nominal exchange rate should be stable over time. O the domestic and foreign price levels should be constant over time. QUESTION 27 Which of the following events will cause the value of the US dollar to appreciate? O A fall in the average prices of European goods. O Changing preferences of US consumers toward Asian products. O Increased demand for foreign assets by US investors. O Increased demand for US exports. Screenshot

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 9PA

See similar textbooks

Similar questions

Purchasing Power Parity (PPP) theory states that Select one: O a the prices of standard commodity baskets in two countries are not related. O b. None of them. O c. as the purchasing power of a currency sharply declines (due to hyperinfiation) that currency will appreciate against stable currencies. O d the exchange rate between currencies of two countries should be equal to the ratio of the countries' price levels. 22 As of today, the spot exchange rate is C100 = $1.20, and the rate of infiation expected to prevoil for the next year in the U.S. is 2% and 3% in the eurozone. What is the one-year forward rate that should prevail? Select one: O a cL00 - S1.2379 O b S1.00 = co.8623 O c. S1.00 - €CLI883 O d e100 - S1IBB3
Purchasing power parity theory would suggest that if the Canadian price of a basket of goods is C$1,800, but the same basket in the United States is U.S.$1,300, and the actual exchange rate is C$1.30 = U.S.S1.00, then the value of the Canadian dollar should O A. depreciate by approximately 8.9 percent. O B. depreciate by approximately 6.2 percent. OC. appreciate by approximately 8.9 percent. O D. appreciate by approximately 6.2 percent. O E. remain unchanged.
Under a fixed exchange rate regime, when the value of the domestic currency decreases, it is called a(n) O depreciation O appreciation O revaluation O devaluation O none of these are correct
If the actual exchange rate for the euro value of the Australian dollar is higher than the exchange rate that would satisfy absolute PPP, which of the following statements is correct? O The Australian dollar is undervalued because its extinal purchasing power exceeds its iternal purchasing power O The Australian dollar is overvalued because its external purchasing power exceeds its internal purchaing power The Australian dollar is undervalued because its internal purchasing power exceeds its external purchasing power O The Australian dollar is overvalued because its internal purchasing power exceeds its external purchasing power
Suppose a basket of goods costs $50 in the U.S. and €20 in France. What exchange rate, in dollars per euro, would be consistent with purchasing power parity? O $1.50 O $0.40 O $2.50 O $2
The demand for Australian dollars in the foreign exchange market equals 14000 – 3000e and thesupply of Australian dollars in the foreign exchange market equals 2000 + 2000e, where e is thenominal exchange rate expressed in euros per Australian dollar. If the Australian dollar is fixed at 2euros per Australian dollar, then to maintain this fixed rate, what is the required change in theReserve Bank of Australia’s holdings of euros? 1increase by 4000 euros 2decrease by 2000 euros 3decrease by 4000 euros 4increase by 2000 euros
How will an increase in tourist arrivals affect the market for foreign exchange? Select one: O a. Inward shift of the demand curve; real exchange rate falls. O b. Outward shift of the supply curve, real exchange rate falls O . Inward shift of the demand curve; real exchange rate rises O d. Outward shift of the demand curve; real exchange rate rises. O e. Inward shift of the supply curve; real exchange rate rises.
Under a fixed exchange rate system (A). would be an exogenous monetary policy instrument, whereas under a flexible exchange rate system (B) endogenous monetary policy instrument. would be an O a. (A) the interest rate; (B) the exchange rate O b. (A) the exchange rate; (B) the interest rate O c. (A) the interest rate; (B) the interest rate O d. (A) the exchange rate; (B) the exchange rate
Which of the following statement is incorrect? O Most of the answers are correct. O Diversifying investments across several countries often reduces risk. The absolute purchasing power parity theory posits that exchange rates are determined by the differences in the prices of a given market basket of traded goods and services when there are no trade barriers. O An exchange rate of two currencies found by using a common third currency is known as an interest rate. O Exchange rates can be expressed as the number of units of the domestic currency per one unit of the foreign currency.
Assuming that the price of a Big Mac in the United States is US$3.71 and £$2.30 in the United Kingdom (excluding taxes). If the current exchange rate is £$1.60/US$ then the pound is and will Select one: O a. overvalued; depreciate O b. remain unchanged O c. undervalued; appreciate O d. undervalued; depreciate O e. overvalued; appreciate
Assuming that the price of a Big Mac in the United States is US$3.71 and £$2.30 in the United Kingdom (excluding taxes). If the current exchange rate is £$1.60/US$ then the pound is and will Select one: O a. overvalued; depreciate O b. remain unchanged, O c. undervalued; appreciate O d. overvalued; appreciate e. undervalued; depreciate Next page page
If one Canadian dollar buys US$0.85, and one Euro buys US$1.20, then one Euro should buy O a. C$1.02 O b. C$1.41 O c. C$2 O d. C$1.64