Question 1

List four factors that can lead to an increase in the demand of imports and therefore an increase in the supply of U.S. dollars in the dollar market.

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Question 2

List four factors that can lead to a decrease in the demand for imports and therefore a decrease in the supply of U.S. dollars in the dollar market.

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Question 3

Explain four different ways in which financial flows affect the supply of U.S. dollars in the dollar market.

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Question 4

Suppose the domestic price of a hamburger in the United States is $4.50. A comparable burger in Japan is 650 yen. If the nominal exchange rate is 109 Yen per 1 U.S. dollar, then what is the approximate real exchange rate?

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The answer of Suppose the domestic price of a hamburger...

Question 5

Suppose the current nominal exchange rate is 85 Bangladeshi taka per U.S. dollar. You visit Dhaka, Bangladesh, and spend on the following items. Meals for a total of 15,000 taka; clothes for 125,000 taka and gifts for 60,000 taka. Approximately how much did your purchases cost in U.S. dollars?

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The answer of Suppose the current nominal exchange rate is...

Question 6

Suppose the domestic price of a hamburger in the United States is $4.50. A comparable burger in Kenya is 500 Kenyan shillings. If the nominal exchange rate is 103 Kenyan shillings per 1 U.S. dollar, then what is the approximate real exchange rate?

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Question 7

Suppose the domestic price of a hamburger in the United States is $4.50. A comparable burger in India is 160 rupees. If the nominal exchange rate is 71 rupees per 1 U.S. dollar, then what is the real exchange rate?

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Question 8

Explain the importance of the real exchange rate.

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Question 9

For the US, classify each of the following transactions as an example of an import, an export, a financial inflow or a financial outflow.
(a) A saver from Kenya purchases Amazon stock in the US.
(b) A saver from Kenya purchases a corporate bond in the US.
(c) A US tourist visits Kenya and purchases Kenyan art to bring back to the US.

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The answer of For the US, classify each of the...

Question 10

For the US, classify each of the following transactions as an example of an import, an export, a financial inflow or a financial outflow.
(a) You visit Nigeria as a tourist and buy lots of gifts for your friends back in the US.
(b) The US purchases crude oil from Nigeria.
(c) The Nigerian government pays a US educational consultant to develop new graduate programs in Abuja, Nigeria.

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The answer of For the US, classify each of the...

Question 11

You decide to open a jewelry factory in the US. You can either use beads sourced domestically, or you can use beads from India. The current nominal exchange rate is 70.8 Indian rupees per US dollar. If you purchase the beads from the United States, you will pay $3.50 per 100 beads (inclusive of shipping and handling). If you purchase the beads from India, you will pay 175 Indian rupees per 100 beads (inclusive of shipping and handling). Using this information, answer the following questions.
(a) Calculate the real exchange rate and determine whether you should import the beads or source them domestically.
(b) Suppose that the US supplier of beads is able to lower their price to $3 per 100 beads. Now calculate the real exchange rate and determine whether you should import the beads or source them domestically.

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The answer of You decide to open a jewelry factory...

Question 12

The table presents nominal exchange rate data.
 $$\begin{array} { | l | } 
\hline \text { NOMINAL EXCHANGE RATE } \
\hline 1.28 \text { US dollars per British pound } \
\hline 1.11 \text { US dollars per European Euro } \
\hline 0.68 \text { US dollars per Australian dollar } \
\hline 0.1 \text { US dollars per Swedish krona } \
\hline 0.02 \text { US dollars per Russian ruble } \
\hline
\end{array}$$ ​
(a) Which meal is cheaper in terms of US dollars: lunch for 7 British pounds in London, or lunch for 400 rubles in Moscow?
(b) Which meal is cheaper in terms of US dollars: lunch for 7 British pounds in London, or lunch for 7 Australian dollars in Melbourne?
(c) Which meal is cheaper in terms of US dollars: lunch for 7 British pounds in London, or lunch for 150 Swedish krona in Stockholm?

Accepted Answer

The answer of The table presents nominal exchange rate data.
...

Question 13

Fill in the blanks below, using the choices indicated.
(a) The more Americans import from the rest of the world, the _______ (larger, smaller) the _______ (supply, demand) of dollars in the dollar market.
(b) The more foreigners import from the United States, the _______ (larger, smaller) the _______ (supply, demand) of dollars in the dollar market.

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Question 14

Fill in the blanks below, using the choices indicated.
(a) The less Americans import from the rest of the world, the _____ (larger, smaller) the _____ (supply, demand) of dollars in the dollar market.
(b) The less foreigners import from the United States, the _____ (larger, smaller) the _____ (supply, demand) of dollars in the dollar market.

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Question 15

Fill in the blanks below, using the choices indicated.
(a) The more Japan exports to the United States, the ____ (larger, smaller) the _____ (supply, demand) of yen in the market for yen.
(b) The more Japan imports from the United States, the ____ (larger, smaller) the _____ (supply, demand) of yen in the market for yen.

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The answer of Fill in the blanks below, using the...

Question 16

Fill in the blanks below, using the choices indicated.
(a) The less India exports to the United States, the _____ (larger, smaller) the _____ (supply, demand) of rupees in the market for the Indian rupee.
(b) The less India imports from the United States, the _____ (larger, smaller) the _____ (supply, demand) of rupees in the market for the Indian rupee.

Accepted Answer

The answer of Fill in the blanks below, using the...

Question 17

The difference between money flowing into a country and money flowing out of a country over a given period of time is the:

Accepted Answer

The balance of payments is the difference between money flowing into a country and money flowing out of a country over a given period of time.

Question 18

If the rate of exchange is €1 = US$2, then US$1 =

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Question 19

To determine the real exchange rate between two currencies, one must know the:

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The answer of To determine the real exchange rate between...

Question 20

Other things equal, if the U.S. dollar decreases in value against the Mexican peso:

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Quiz 28: International Finance and the Exchange Rate

List four factors that can lead to an increase in the demand of imports and therefore an increase in the supply of U.S. dollars in the dollar market.

List four factors that can lead to a decrease in the demand for imports and therefore a decrease in the supply of U.S. dollars in the dollar market.

Explain four different ways in which financial flows affect the supply of U.S. dollars in the dollar market.

Suppose the domestic price of a hamburger in the United States is $4.50. A comparable burger in Japan is 650 yen. If the nominal exchange rate is 109 Yen per 1 U.S. dollar, then what is the approximate real exchange rate?

Suppose the current nominal exchange rate is 85 Bangladeshi taka per U.S. dollar. You visit Dhaka, Bangladesh, and spend on the following items. Meals for a total of 15,000 taka; clothes for 125,000 taka and gifts for 60,000 taka. Approximately how much did your purchases cost in U.S. dollars?

Suppose the domestic price of a hamburger in the United States is $4.50. A comparable burger in Kenya is 500 Kenyan shillings. If the nominal exchange rate is 103 Kenyan shillings per 1 U.S. dollar, then what is the approximate real exchange rate?

Suppose the domestic price of a hamburger in the United States is $4.50. A comparable burger in India is 160 rupees. If the nominal exchange rate is 71 rupees per 1 U.S. dollar, then what is the real exchange rate?

Explain the importance of the real exchange rate.

The difference between money flowing into a country and money flowing out of a country over a given period of time is the:

If the rate of exchange is €1 = US$2, then US$1 =

To determine the real exchange rate between two currencies, one must know the:

Other things equal, if the U.S. dollar decreases in value against the Mexican peso: