Managerial Economics (Froeb) – Ch 11 Foreign Exchange, Trade, and Bubbles – Flashcards

In the market for foreign exchange between England and Iceland, the demand for pounds includes who?

A decline in dollar-denominated interest rates will induce foreign investors to borrow in dollars, sell dollars to buy a foreign currency and then invest in the foreign country. What does this cause?

____________ increase domestic demand by making exports cheaper and imports more expensive. It helps domestic firms but hurts domestic consumers. Foreign firms are hurt, but foreign consumers are helped.

With price bubbles, if buyers expect a future price increase, they will _______ their purchases. Sellers will ______ selling to take advantage of it. (delay/accelerate

The intersection between demand for dollars and the supply of dollars is known as the _____________

An individual in the US wants to buy office equipment from England that costs 2800 pounds. If the exchange rate is $1.92/pound, how much will it cost him in dollars?

If the Chinese yuan devalues relative to the US dollar, then a) US producers will benefit; Chinese consumers will benefit b) US producers will benefit; Chinese consumers will be hurt c) US producers will be hurt; Chinese consumers will benefit d) US producers will be hurt; Chinese consumers will be hurt

Following a peso appreciation relative to the dollar, which of the following results is expected to occur? a) prices in the US will rise, prices in Mexico will rise b) prices in the US will rise, prices in Mexico will fall c) prices in the US will fall, prices in Mexico will rise d) prices in the US will fall, prices in Mexico will fall

Following a peso appreciation relative to the dollar, which of the following results is expected to occur? a) US consumers would benefit and Mexican producers would benefit b) US consumers would be hurt and Mexican producers would benefit c) US consumers would benefit and Mexican producers would be hurt d) US consumers would be hurt and Mexican producers would be hurt

Following an increase in Mexican interest rates relative to US interest rates (which causes Mexican investors to borrow abroad to invest domestically), what would you expect to happen to the US dollar and what would happen to prices in Mexico?

In July 2014 the price of a Big Mac was $4.80 in the US while in China it was only $2.73 at market exchange rates. So the "raw" Big Mac index says that the yuan was undervalued by 43% at that time. How would domestic inflation in China affect the Big Max index? a) the Big Mac Index would indicate that the Chinese currency is less under-valued b) the Big Mac Index would indicate that the Chinese currency is more undervalued c) the Big Mac Index is not affected by inflation d) the Big Mac Index would indicate that the Dollar is more under-valued

If the US economy strengthens, consumer incomes increase and consumers buy more imported goods and services. How will this affect exchange rates? a) the dollar will appreciate relative to the yuan and US prices will b) the dollar will appreciate relative to the yuan and US prices will c) the dollar will depreciate relative to the yuan and US prices will d) the dollar will depreciate relative to the yuan and US prices will

If buyers expect future price increases, they will ________ their purchases to avoid it. Similarly, sellers will _________ selling to take advantage of it. (accelerate/demand)