f01_ps4

f01_ps4 - Problem Set 4 14.02 Fall 2001 1 True or false,...

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Problem Set 4 14.02 Fall 2001 1 True or false, explain (3 pts. each) 1. If the dollar is more expensive, Americans are happy because they own dollars and its good to own expensive things. 2. If we know that the Yen is going to be weaker in the future, we should anticipate our car purchases. 3. If a Colombian co f ee producer owes us money, we are better o f if the dollar becomes stronger and the Colombian Peso weaker. 4. If we expect the euro to su f er a discrete depreciation and then stabilize at a certain value, we expect the European interest rates to be higher than in the US now and lower than in the US after the depreciation. 5. Interest rate di f erences between Luxembourg and Belgium are ex- plained by expected exchange rate movements. 6. If Argentina devalues its currency (and people expect this to hap- pen), investment should expand. 7. If Chile revalues its currency (and people did not expect this to happen and hence start expecting it to reverse), money demand should fall. 8. If we are an American exporter and a Danish customer pays us with foreign stock, we are contributing to net capital f ows. If he hadpaidwithdollarsitwouldnothavehadane f ect on the capital account. 1
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9. If an American mutual fund sells some of its German bonds in Frankfurt, it is contributing to net foreign holdings. If it sells it in New York, it is not. 10. In a world of open f nancial markets, where capitals move from country to country seeking better returns, interest rates have to bethesameina l lcountr iesre F
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This note was uploaded on 11/29/2009 for the course 14 14.02 taught by Professor Geurrieri during the Fall '09 term at MIT.

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f01_ps4 - Problem Set 4 14.02 Fall 2001 1 True or false,...

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