Term
| consider two countries that trade with each other, called x and y, according to the text, inflation in country x will have greater impact on country y under the _______ system. Now, consider two other countries that trade with each other, called A and B. Unemployment in Country A will have a greater impact on unemployment in Country B under the___________ system. |
|
Definition
|
|
Term
| assume a central bank exchanges its currency for other foreign currecies in the foreign exchange market, but does not adjust for the resulting change in ;the money supply. this is an example of |
|
Definition
| Nonsteralized Intervention |
|
|
Term
| Which of the following is an example of direct intervantion in foreign exchange markets? |
|
Definition
| Exchanging dollars for foreign currency. |
|
|
Term
| countries that have adopted the euro must agree on a single ____ policy |
|
Definition
|
|
Term
| It has been argued that the excahnge rate can be used as a policy tool. Assume that the US government would like to reduce inflation. Which of the following is an appropriate actin given this scenario? |
|
Definition
| Buy dollars with foreign currency |
|
|
Term
| During the period 1944-1971, the U.S. used a ___ System |
|
Definition
|
|
Term
| If interest rate parity exists, then ___________ is not feasible. |
|
Definition
| Covered interest arbitrage |
|
|
Term
| Assume that the US investors are benefiting from covered interest arbitragedue to high interest rates on euros. Which of the following forces should result from the act of this covered interest arbitrage? |
|
Definition
| downward pressure on the euro's forward rate. |
|
|
Term
| assume that a US firm can invest funds for one year in the US at 12% or invest funds in Mexico at 14%. The spot rate of the peso is $.10 while the one-year forward rate of the peso is $.10. if US firms attempt to use covered interest arbitrage what forces should occur? |
|
Definition
| Spot rate of peso increases; forward rate of peso decreases |
|
|
