If you are about to go to Brazil and would like to obtain Brazilian currency, this acquisition would be accomplished in the
Answer(s): E
The foreign exchange market is the market in which the currencies of different countries are bought and sold.Thus, in order to exchange your dollars for cruzeiros you must access the foreign exchange market.
The inevitable consequence of price controls is:
Answer(s): C
Since price controls, of which exchange rate control are a type, lead to shortages, black markets develop.
An unanticipated shift to a more expansionary monetary policy will most likely cause
Answer(s): D
An unanticipated expansionary monetary policy will increase economic growth, accelerate in the inflation rate and lower real interest rates. These factors lead to an decrease in the demand for the nation's exports and assets and consequently a decrease in the demand for the nation's currency. This serves to cause the currency to depreciate. Lower real interest rates cause a capital outflow because investors liquidate their assets in search of a higher yield abroad.
The dollar would have appreciated if
An increase in the value of a domestic currency relative to foreign currencies defines a currency appreciation.Thus, the value of the dollar in this example has increased since one dollar now buys two marks whereas before it only purchased one mark. The U.S. dollar now "buys" more marks.
Under a system of fixed exchange rates, which of the following will most likely increase a balance of payments deficit?
Expansionary monetary policy will create inflation and cause interest rates to fall. Both of these consequences will cause the demand for U.S. exports and assets to fall which will increase the balance of payments deficit.
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