Hi, do you have the answers for the course International Financial Markets? This is my homework: Thanks! 1) Which line in the figure shows a more

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Hi, do you have the answers for the course International Financial Markets? This is my homework: Thanks!

1) Which line in the figure shows a more elastic supply for euros?

A) Line S

B) Line S’

C) There elasticities are the same.

D) This cannot be determined from the graph.

2) The approach to finding a relationship between exchange rates and the balance of payments that focuses on the prices of goods and services in the markets is

A) the elasticities approach.

B) the absorption approach.

C) the Marshall Lerner method.

D) the fixed exchange approach.

3) A necessary condition for exchange rate stability where the sum of the elasticity of import demand and the elasticity of export supply must be greater than one is known as

A) the elasticities approach.

B) the elasticities rule.

C) the Marshall Lerner condition.

D) the exchange rate condition.

4) The reason that supply and demand tend to be more price elastic over longer time periods is because

A) some goods have longer shelf life and are reordered less often.

B) it takes time for households and businesses to adjust to price changes.

C) firms incur costs in changing the price of goods on their shelves.

D) the feedback loop from buyers to sellers takes time.

5) The depreciation of a currency may cause an initial worsening of the balance of payments before it improves. This is called the

A) time value of money.

B) J-curve effect.

C) Marshall Lerner condition.

D) shock effect.

6) If a 10% currency appreciation results in a 10% decrease in the price of imported goods, then this is called

A) import inflation.

B) the Marshall Lerner condition.

C) a partial pass-through.

D) a complete pass-through.

7) The extent of ________ is one key factor in determining the extent of pass-through effects in an economy.

A) perfect elasticity in currency s

B) exchange rate flexibility

C) upply relative market power

D) currency overhang

Answer: c

8) When discussing pass through effects, it is fair to say

A). that the degree of pass through varies across industries

B) that the degree of pass through varies across nations.

C) that the degree of pass through varies across time and industries.

D). that the degree of pass through varies across nations, time and industries

9) The theory of the relationship between balance of payment and exchange rates that deals with the size of a nation’s expenditures is called

A) the absorption approach.

B) the elasticities approach.

C) the Marshall Lerner condition.

D) the exchange rate condition.

10) Which of the following equations for domestic absorption is correct?

A) a ≡ c + i + g + im

B) a ≡ c + i + g + im – x

C) a ≡ x – im

D) a ≡ c + i + ca + im

Answer: A

11) If real income is 250b and the amount of domestic absorption is 322b, what is the current account balance?

A) The current account surplus is 572b.

B) The current account surplus is 72b.

C) The current account deficit is 572b.

D) The current account deficit is 72b.

12) If real income rises faster than absorption during a time of economic expansion, then

A) the nation will experience a current account deficit.

B) the nation will experience a current account surplus.

C) national production will increase until absorption and income are balanced.

D) the nation’s imports must rise relative to its exports.

13) During the course of an economic contraction, it is likely that a country would experience

A) a currency depreciation as explained by the elasticities approach.

B) a currency appreciation as explained by the absorption approach.

C) a currency depreciation as explained by the absorption approach.

D) a currency appreciation as explained by the elasticities approach.

14) The government’s ability to alter expenditures in its economy between imports and exports by enacting policies to change their relative prices is known as

A) expenditure-switching instruments.

B) trade drivers.

C) tariff tools.

D) absorption instruments.

15) The use of an absorption instrument allows a government to

A) increase or decrease national absorption.

B) change the balance between imports and exports.

C) alter the balance of payments with a specific country.

D) reduce the influence of domestic absorption on exchange rates.

16) If real income rises faster than absorption during a time of economic expansion, then

A) the currency should depreciate.

B) the nation’s exports must rise relative to its imports.

C) the nation will experience a current account deficit and a capital account surplus.

D) absorption spending will continue to slow.

17) The basic assumption behind the J-curve effect is that

A) investors tend to be overly cautious in currency instruments

B) in the short run, supply will exceed demand; in the long run, they will be equal.

C) an overshooting effect occurs as people adjust to the new information.

D). supply and demand for currencies are less elastic in the short run than in the long run.

18) The quantity demanded of a currency in the foreign exchange market is derived from

A) the level of domestic absorption.

B) the nation’s demand for exports.

C) the nation’s demand for imports.

D) the supply of other currencies.

19) In the trade-based theory of exchange rate determination, the quantity supplied of a currency in the foreign exchange market results from

A) the nation’s demand for imports

B) its exports of goods and services.

C) the level of domestic absorption.

D) the import demand curve.

20) The Marshall Lerner condition specifies

A) the necessary condition for exchange rate stability.

B) a sufficient condition for the determination of an exchange rate regime.

C) the distinction between the elasticities and the absorption approach.

D) the successfulness of expenditure-switching instruments.

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