Question 1

Assume Canada has a flexible exchange rate regime.Explain the impact on the Canadian foreign exchange market if there is a decrease in the Canadian price level.

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Question 2

Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is an increase in exports.What will the Bank of Canada do to maintain the fixed exchange rate?

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Question 3

List the four arguments for a fixed exchange rate regime.

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Question 4

Distinguish between portfolio investment and direct investment.

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Question 5

Explain who and why demands Canadian dollar in the foreign exchange market?

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Question 6

List the five factors that explain the differences in the purchasing power parity.

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Question 7

What are the components of the current account?

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Question 8

Suppose a mobile phone cost $350 in Canada and $\times$2,500 in China.If the nominal exchange rate is $1 Canadian dollar is equal to $\times$7.75.
a)What is the value of the real exchange rate?
b)In which country is the mobile phone cheaper?

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Question 9

Assume that the demand for the Canadian dollar (C$)increases.Assume the increase in the dollar was due to currency speculation,What is the effect on:
a)the value of the Canadian exchange rate?
b)the level of aggregate demand?
c)the level of real GDP?
d)the price level?

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Question 10

Joanne operates a small foreign-currency exchange business.She begins each day with three boxes of cash.Each box contains 5 000 units of Canadian currency and 5 000 units of another currency.The following table shows Joanne's holdings of each currency at the end of the business day.
  What is the value of the Canadian dollar in terms of these three currencies?

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Question 11

Refer to the following list,and identify who would be hurt and who would benefit from a depreciation of the Canadian dollar.
a)An Italian father spending a summer with his daughter in Ottawa.
b)A Canadian researcher living in California who is paid a monthly salary by his Vancouver employer.
c)A retired British couple living in Victoria and receiving a British pension.
d)A Nova Scotia couple thinking of buying retirement property in Florida.
e)A Canadian family who regularly visit Spain.

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Question 12

Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is a decrease in foreign income.What will the Bank of Canada do to maintain the fixed exchange rate?

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Question 13

Suppose the international demand and supply of Canadian dollars (in billions)is as shown in the following table:
  This represents the total market for Canadian dollars (i.e.there are no transfers,speculation or arbitrage).
If the exchange rate is flexible,what will be the following values:
a)The Canadian dollar
b)The balance of trade.
c)The current account balance:
d)The overall balance of payments (current and capital accounts):
Suppose,on the other hand,that the exchange rate is fixed at US 0.86,what will be the following values:
e)The current account balance:
f)The total balance of payments (current and capital accounts):

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Question 14

What are the four determinants of the demand for the Canadian dollar?

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Question 15

The following balance of payments data is for the economy of Augusta:
  a)What is the value of its balance of trade?
b)What is the balance on its current account?
c)What is the balance on its capital account?
d)Is there an overall balance of payments surplus or deficit? How much?

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Question 16

What is the difference between a fixed,flexible,and managed ("dirty")float exchange rate regime?

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Question 17

Assuming flexible exchange rates,explain how a shortage of Canadian dollars in the foreign exchange market is eliminated.

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Question 18

Distinguish between devaluation and depreciation.

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Question 19

Assume Canada has a flexible exchange rate regime.Explain the impact on the Canadian foreign exchange market if there is an increase in Canadian interest rates.

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Question 20

If a Canadian hockey stick has a price of $32,how much does it cost in:
a)Europe,assuming an exchange rate of 1 euro = $1.60 Can.
b)China,assuming an exchange rate of 1 Yuan = $0.20 Can.

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Quiz 11: Exchange Rates and the Balance of Payments

Assume Canada has a flexible exchange rate regime.Explain the impact on the Canadian foreign exchange market if there is a decrease in the Canadian price level.

Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is an increase in exports.What will the Bank of Canada do to maintain the fixed exchange rate?

List the four arguments for a fixed exchange rate regime.

Distinguish between portfolio investment and direct investment.

Explain who and why demands Canadian dollar in the foreign exchange market?

List the five factors that explain the differences in the purchasing power parity.

What are the components of the current account?

Suppose a mobile phone cost $350 in Canada and $\times$ 2,500 in China.If the nominal exchange rate is $1 Canadian dollar is equal to $\times$ 7.75. a)What is the value of the real exchange rate? b)In which country is the mobile phone cheaper?

Assume that the demand for the Canadian dollar (C$)increases.Assume the increase in the dollar was due to currency speculation,What is the effect on: a)the value of the Canadian exchange rate? b)the level of aggregate demand? c)the level of real GDP? d)the price level?

Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is a decrease in foreign income.What will the Bank of Canada do to maintain the fixed exchange rate?

What are the four determinants of the demand for the Canadian dollar?

The following balance of payments data is for the economy of Augusta: a)What is the value of its balance of trade? b)What is the balance on its current account? c)What is the balance on its capital account? d)Is there an overall balance of payments surplus or deficit? How much?

What is the difference between a fixed,flexible,and managed ("dirty")float exchange rate regime?

Assuming flexible exchange rates,explain how a shortage of Canadian dollars in the foreign exchange market is eliminated.

Distinguish between devaluation and depreciation.

Assume Canada has a flexible exchange rate regime.Explain the impact on the Canadian foreign exchange market if there is an increase in Canadian interest rates.

If a Canadian hockey stick has a price of $32,how much does it cost in: a)Europe,assuming an exchange rate of 1 euro = $1.60 Can. b)China,assuming an exchange rate of 1 Yuan = $0.20 Can.

Quiz 11: Exchange Rates and the Balance of Payments

Assume Canada has a flexible exchange rate regime.Explain the impact on the Canadian foreign exchange market if there is a decrease in the Canadian price level.

Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is an increase in exports.What will the Bank of Canada do to maintain the fixed exchange rate?

List the four arguments for a fixed exchange rate regime.

Distinguish between portfolio investment and direct investment.

Explain who and why demands Canadian dollar in the foreign exchange market?

List the five factors that explain the differences in the purchasing power parity.

What are the components of the current account?

Suppose a mobile phone cost $350 in Canada and ×\times× 2,500 in China.If the nominal exchange rate is $1 Canadian dollar is equal to ×\times× 7.75. a)What is the value of the real exchange rate? b)In which country is the mobile phone cheaper?

Assume that the demand for the Canadian dollar (C$)increases.Assume the increase in the dollar was due to currency speculation,What is the effect on: a)the value of the Canadian exchange rate? b)the level of aggregate demand? c)the level of real GDP? d)the price level?

Assume that Canada has a fixed exchange rate regime.Explain the effect on the foreign exchange market if there is a decrease in foreign income.What will the Bank of Canada do to maintain the fixed exchange rate?

What are the four determinants of the demand for the Canadian dollar?

The following balance of payments data is for the economy of Augusta: a)What is the value of its balance of trade? b)What is the balance on its current account? c)What is the balance on its capital account? d)Is there an overall balance of payments surplus or deficit? How much?

What is the difference between a fixed,flexible,and managed ("dirty")float exchange rate regime?

Assuming flexible exchange rates,explain how a shortage of Canadian dollars in the foreign exchange market is eliminated.

Distinguish between devaluation and depreciation.

Assume Canada has a flexible exchange rate regime.Explain the impact on the Canadian foreign exchange market if there is an increase in Canadian interest rates.

If a Canadian hockey stick has a price of $32,how much does it cost in: a)Europe,assuming an exchange rate of 1 euro = $1.60 Can. b)China,assuming an exchange rate of 1 Yuan = $0.20 Can.

Suppose a mobile phone cost $350 in Canada and $\times$ 2,500 in China.If the nominal exchange rate is $1 Canadian dollar is equal to $\times$ 7.75. a)What is the value of the real exchange rate? b)In which country is the mobile phone cheaper?