quiz2 - AGEC 217 Quiz 23 11/16/09 1. (15) What foreign...

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Quiz 23 11/16/09 1. (15) What foreign exchange system does the US and most of the developed world use? Floating Exchange rate system. 2. (15) How is the value of the US dollar determined relative to the Canadian dollar? Currency traders determine the value of the currencies. 3. (16) What is the greatest advantage of using this system? Trade imbalances are self-correcting. If one country starts to buy much more from another country than it sells to them, trade will become more balanced. 4. (70) Explain what will happen if the US begins to buy a great deal more from Canada than they buy from us. ± (10) Canada will get lots of US dollars and (10) their value will fall. ± (10) The US will find that Canadian products are more expensive because our dollars buy fewer of theirs. (10) We will begin to buy less from them. ± (10) Canadians will find that American products are cheaper because they can buy our currency cheaper. (10) They will begin to buy more from us. ± (10)
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quiz2 - AGEC 217 Quiz 23 11/16/09 1. (15) What foreign...

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