# D the dollar should fall by 1 versus both the peso

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D) The dollar should fall by 1% versus both the peso and the yen.======bIf the inflation rate in the United States is higher than that in Mexico then in the long run________, everything else held constant.A) the Mexican peso will appreciate relative to the U.S. dollarB) the Mexican peso will depreciate relative to the U.S. dollarC) the Mexican peso will either appreciate, depreciate, or remain constant relative to the U.S.dollarD) there will be no effect on the Mexican peso relative to the U.S. dollar======aIf iPhone 5 costs \$600 in US and â‚¬550 in France and exchange rate between dollar and euro is
\$1.2/â‚¬, then law of one price
D) does not hold and euro should appreciate.======bAccording to PPP, the real exchange rate between two countries will always equal
Suppose that you expect during the next year the dollar will appreciate against the pound from0.5 pound to the dollar to 0.75 pound to the dollar. How much will you expect to make on aninvestment of \$10,000 in British government securities that will mature in one year and payinterest of 8%?
As the relative expected return on dollar assets increases, foreigners will want to hold more________ assets and less ________ assets, everything else held constant.A) foreign; foreignB) foreign; dollarC) dollar; foreignD) dollar; dollar======c
When Americans or foreigners expect the return on ________ assets to be high relative to thereturn on ________ assets, there is a ________ demand for dollar assets, everything else heldconstant.
D) foreign; dollar; constant======bAn increase in the domestic interest rate causes the demand for domestic assets to ________and the domestic currency to ________, everything else held constant.

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Term
Fall
Professor
Staff
Tags
Foreign exchange market, United States dollar