econ423quiz7

# econ423quiz7 - Econ 423 Summer 2009 Lauren Heller Homework...

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Econ 423, Summer 2009 Lauren Heller Homework Quiz #7 Name___________________________________ PID____________________________________ By signing my name and PID above, I agree to abide by the honor code during this quiz. I will only use the homework that I have completed on my own, and will not use any other notes or materials. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If the 2005 inflation rate in Britain is 6 percent, and the inflation rate in the U.S. is 4 percent, then the theory of purchasing power parity predicts that, during 2005, the value of the British pound in terms of U.S. dollars will A) fall by 10 percent. B) rise by 10 percent. C) rise by 2 percent. D) fall by 2 percent. E) do none of the above. 1) 2) If the French demand for American exports rises at the same time that U.S. productivity rises relative to French productivity, then, in the long run, A) the dollar should appreciate relative to the euro. B) the euro should appreciate relative to the dollar. C) the dollar should depreciate relative to the euro. D) it is not clear whether the euro should appreciate or depreciate relative to the dollar. 2) 3) When Bono (who is from Ireland) considers the expected return on dollar deposits in terms of foreign currency, the expected return must be adjusted for A) the interest rates on foreign deposits. B) any expected appreciation or depreciation of the dollar. C) both A and B of the above. D) neither (a) nor (b) of the above. 3) 4) If the interest rate is 7 percent on euro deposits and 5 percent on dollar deposits, and if the dollar is expected to appreciate at a 4 percent rate, A) euro deposits have a higher expected return than dollar deposits. B) the expected return on euro deposits in terms of dollars is 3 percent.

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## This note was uploaded on 08/31/2009 for the course ECON 423 taught by Professor Vd during the Summer '08 term at UNC.

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econ423quiz7 - Econ 423 Summer 2009 Lauren Heller Homework...

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