Hw4AK - ECN 162 International Economic Relations Ina...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1 ECN 162 International Economic Relations University of California - Davis Ina Simonovska Fall 2009 Assignment 4 Answer Key (Maximum Score = 100) Due: Thursday, November 5, at the beginning of class. Multiple-Choice Questions Each question is worth 4 points. Explanation is not required. 1. We can use the existence of arbitrage and the idea of uncovered interest parity (UIP) to assume that any interest rate differential between two currencies must be offset by: A) the change in the quantity of money. B) an offsetting differential in the expected exchange rates. C) offsetting changes in real income D) resulting increases in borrowing denominated in the low interest currency. 2. If money is growth is bigger than income growth, then we can: A) expect unemployment to increase. B) expect inflation to decrease. C) expect inflation to increase. D) expect inflation and unemployment to decrease. 3. Under the monetary approach to exchange rates, if there is a rise in a country's home money supply, and all else is equal, then the exchange rate should: A) depreciate. B) hold steady. C) appreciate. D) appreciate and then remain steady. 4. Forecasting exchange rates involves: A) knowing the history of exchange rate behavior. B) assessing data on money supply growth and potential real income growth. C) understanding the relationship between monetary policy and unemployment. D) assessing data on money supply and unemployment.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Hw4AK - ECN 162 International Economic Relations Ina...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online