international economy QUESTIONS ON UNIT 4 - INTERNATIONAL ECONOMY Question 1: On
ID: 1127840 • Letter: I
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international economy
QUESTIONS ON UNIT 4 - INTERNATIONAL ECONOMY Question 1: On the International Balance of Payments, if the change in US negative, will this cause US currency to appreciate or depreciate? al Balance of Payments, if the change in US Reserve Assets is ve change in the US Reserve Assets account will cause US currency to appreciate change in the US Reserve Assets account will cause US currency to depreciate Question 2: How are e world is using today? are exchange rates determined under the floating exchange rate system that the a exchange rates are fixed by the monetary authority of the country b. exchange rates are pegged to a precious metal such as gold or silver C. exchanges rates are determined by relative supply and demand for goods and financi assets Question 3: If the inflation rate is higher in the US than it is in Europe, how will this affect the valuation of US currency relative to the Euro? a. Higher inflation rates will cause US currency to appreciate b. Higher inflation rates will cause US currency to depreciate Question 4: The United States imports skis from Sweden. The price of a pair of skis in Sweden is €250.00. The exchange rate between Euros and US dollars is US$1.35/€. What is the price of a pair of imported skis in the United States? a. $185.19 b. $250.00 c. $337.50 Question 5: If the US dollar depreciates (relative to the Euro) will the skis in Question 4 be more expensive or less expensive in the United States? a. The skis will be more expensive in the US b. The skis will be less expensive in the US Question 6: When our currency depreciates, how does this affect our GDP? a. Depreciation causes our goods to be more expensive abroad, and this reduces our exports and lowers our GDP b. Depreciation causes our goods to be cheaper abroad, and this increases our exports and increases our GDP Question 7: In which set of accounts on the International Balance of Payments would Merchandise Trade be recorded: a. Current Accounts b. Financial or Capital Accounts c. Miscellaneous Accounts Question 8: If the United States runs a trade surplus, how will this affect the valuation of US currency relative to the currencies of our trading partners? a. A US trade surplus will cause US currency to depreciate b. A US trade surplus will cause US currency to appreciateExplanation / Answer
1. A) a negative change in the US reserve account will cause the currency to appreciate.
When the reserves are sold off the currency moves forward as domestic assets are bought.
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