Chapter 18: Q.11 (page 495)
If nominal interest rates in America rise but real interest rates fall, predict what will happen to the U.S. dollar exchange rate.
The dollar will depreciate.
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Through the summer and fall of 2008, as the global financial crisis began to take hold, international financial institutions and sovereign wealth funds significantly increased their purchases of U.S. Treasury securities as a safe haven investment. How should this have affected U.S. dollar exchange rates?
“A country is always worse off when its currency is weak (falls in value).” Is this statement true, false, or uncertain? Explain your answer.
If the price level recently increased byin England while falling by in the Canada, by how much must the exchange rate change if PPP holds? Assume that the current exchange rate is pound per dollar.
If nominal interest rates in America rise but real interest rates fall, predict what will happen to the U.S. dollar exchange rate
If the Indian government unexpectedly announces that
it will be imposing higher tariffs on foreign goods one
year from now, what will happen to the value of the
Indian rupee today?
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