mhw14ANS - MHW14 Question3 - Single Correct 1.0 Point If...

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Question3 - Single Correct 1.0 Point If the prices in the United States rise faster than those in other countries, in the LONG RUN A the interest rate in the United States falls. B the exchange rate rises. C then interest rate parity must not hold. D the exchange rate falls. PPP – IN THE LR EXCHANGE RATES MOVE TO EQUALIZE PRICES HENCE HIGHER INFLATION IN U.S., CAUSES DOLLAR TO FALL Question9 - Single Correct 1.0 Point Speculative attacks on a currency can occur under A fixed exchange rate regimes B floating exchange rate regimes C purchasing power regimes D par-standard regimes FACT. SPECULATIVE ATTACK IS WHEN CURRENCY SPECULATORS (SOROS) BELIEVING A CURRENCY IS OVER VALUED, SHORT IT (SHORT FUTURE CONTRACTS ON THAT CURRENCY, ETC) HOPING TO FORCE THE GOVERNMENT TO DEVALUE SINCE SELLING PRESSURE ON THE CURRENCY USES UP THE COUNTRY’S FOREIGN RESERVES, FORCING A DEVALUATION. CAN ONLY HAPPEN UNDER FIXED RATES – WITH FLOATING, CURRENCY WILL JUST DEPRECIATE TO ‘CORRECT LEVEL Question23 - Single Correct 1.0 Point Under fixed exchange rate regimes, a country can maintain a _______ currency indefinitely, but not an _______ one A undervalued, overvalued B under valued, fairly valued. C over valued, undervalued D none of these are correct. UNDERVALUED, LIKE CHINA, SINCE IT NEEDS MERELY TO SUPPLY (PRINT) ALL OF ITS CURRENCY THAT THE MARKET DESIRES. WITH AN OVER VALUED CURRENCY (LIKE THE U.S. HAD IN THE 60’S, LEADING TO THE COLLAPSE OF BRETTON WOODS), TO MAINTAIN FIXED RATES THE COUNTRY MUST BUY ITS OWN CURRENCY WITH FOREIGN RESERVES, OF WHICH IT WILL EVENTUALLY RUN OUT, WHICH IS WHY WE ABANDONED BRETTON WOODS. Question30 - Single Correct
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This note was uploaded on 02/20/2012 for the course 220 301 taught by Professor Carlshu-minglin during the Fall '10 term at Rutgers.

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mhw14ANS - MHW14 Question3 - Single Correct 1.0 Point If...

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