Unformatted text preview: national business.
e. Firms engage in global exploitation of their proprietary
technologies while protecting them from third parties.
This reflects the theory of XXX
This Based on the theory that exchange rates are
determined by current international flows
between countries, iif the domestic real
interest is higher than foreign real interests, the
domestic currency will:
domestic 44. a.
e. Appreciate against foreign currencies
Depreciate against foreign currencies
Be unaffected by real interest rate differences
Fluctuate within wider bands
Become inconvertible Assume that U.S. inflation rate is 6 percent
while U.K. inflation rate is 13 percent per year.
If the exchange rate $/£ = 1.8950 at the beginning of
the year, obtain the rate at the
end of the year if
None of the above. 46. Which of the following currencies is
currently tied to gold?
f. U.S. Dollar.
The British Pound
None of the above
None 47. Assume that the consumer price index in the
United States rose from 100 to 108 and during
the same period the Swiss consumer price
index moved from 100 to 112. This occurred
during a period when the exchange rate at the
beginning of the period was $.20 per Swiss franc.
At the end of this period, according to the
a. The franc was worth less dollars. b.
e. The franc was worth more dollars.
The franc was worth the same in dollars.
Real exchange rate remained constant.
Nominal exchange rate remained constant 48. A theory that explains exchange rate
changes based on relative differences
price levels in different countries is the:
e. International Fisher Equation
Purchasing Power Parity.
Interest Rate Parity.
Inflation Theory 49. If the approximate Fisher Equation holds
and real interest rates are equalized
among countries by arbitrage, then:
a. Diifferences in domestic and foreign nominal
fferences interest rates equal differences in exchange rates
b. Differences in domestic and foreign inflation
rates equal differences in domestic and foreign
rates nominal interest rates
c. The International Fisher Equation holds
d. The Purchasing power Parity holds
e. The law of one price holds
e. 50. Assume that you can purchase a Big Mac in
the U.S. for $3.10 and a Big Mac in Hong Kong
for HK $9.20 and that the actual exchange rate is
HK $7.73 per U.S. dollar. Which of the following
statements is true according to absolute PPP?
d. The Hong Kong dollar is undervalued
The Hong Kong dollar is overvalued
The Hong Kong dollar is correctly valued
You can buy a Big Mac for more U.S. dollars in
Hong Kong than in the U.S.
e. Purchasing Power Parity holds true between HK$
and 51. Assume that a Big Mac costs $3.10 in the
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This note was uploaded on 12/17/2012 for the course FIN 3604 taught by Professor Zhang during the Spring '12 term at University of San Francisco.
- Spring '12
- Exchange Rate