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- If a country’s par exchange rate is overvalued, what kind of intervention would that country’s central bank be forced to undertake, and what kind of effect would it have on its international reserves? What must happen if this country’s central bank decides not to intervene anymore?Under a floating exchange-rate system, an increase in the international demand for electronic appliances manufactured in Japan will result in deflation in the Japanese economy. an increase in Japan's trade deficit with other countries. an appreciation of the yen vis-Ã -vis other currencies. a reduction of international reserves held by the central bank of Japan.1. In order to reduce its current-account deficit, the United States would NOT do which of the following? a . raise national product relative to national spending b. decrease savings relative to domestic investment c . increase savings relative to domestic investment d . reduce the federal budget deficit
- If the downward pressure on the currency persists for a long period, even after successive interventions in the foreign exchange market, would it be difficult to maintain the fixed exchange rate?Explain why the Cedi continues to depreciate against most major international currencies.What does it mean when it is said that the United States is running a trade deficit? Whatimpact will a trade deficit have on interest rates?
- A rise in the domestic inflation rate and a simultaneous, yet bigger rise in the foreign inflation rate leads to depreciation of the foreign currency. depreciation of the domestic currency. no change in the exchange rate. the effect cannot be determined without knowing the exact changes in inflation ratesIf the United States imports more goods from abroad than it exports, then foreigners will tend to have a surplus of U.S. dollars. What will this do to the value of the dollar with respect to foreign currencies? What is the corresponding effect on foreign investments in the United States?Which one of the factors is most likely to be associated with an increase in the US trade deficit: higher savings rate in the US O higher investment opportunity in the US O low spending rate, relative to income levels in the US O depreciation of the US dollar
- What happens over time to the currencies of countries with higherinflation rates than that of the United States? To those with lowerinflation rates?Under a flexible exchange rate system, an increase in the value of the U.S. dollar in terms of other currencies is referred to as a depreciation of the U.S. dollar. an appreciation of the U.S. dollar. a monetizing of the U.S. dollar. a devaluation of the U.S. dollar.What is the effect on a country’s economy of an artificially lowexchange rate? Of an artificially high exchange rate?
