IF when cost $4 per bushel in the United States and 2 pounds per bushel in Great Britain then in the presence of purchasing power parity the exchange rate should be ?

A. $50 per pound
B. $1.00 per pound
C. $2.00 per pound
D. $8.00 per pound

The high foreign exchange value of the U.S dollar in the early 1980s can best be explained by ?

A. Additional investment funds made available from overseas
B. Lack of investor confidence in u.s fiscal policy
C. Market expectations of rising inflation in the united states
D. American tourists overseas finding costs increasing

When the price of foreign currency (the exchange rate) is above the equilibrium level ?

A. An excess supply of that currency exists in the foreign exchange market
B. An excess demand for that currency exists in the foreign exchange market
C. The supply of foreign exchange shifts outward to the right
D. The supply of foreign exchange shifts backward to the left

Suppose Canada and Switzerland were the only two countries in the world There exists an excess supply of Swiss francs on the foreign exchange market This suggests that ?

A. The canadian current account balance is in surplus
B. The swiss current account balance is in deficit
C. The canadian current account balance is in equilibrium
D. The swiss current account balance is in equilibrium

For the United States suppose the annual interest rate on government securities equals 12 percent while the annual inflation rate equals 8 percent For Japan the annual interest rate on government securities equals 10 percent while the annual inflation rate equals 5 percent the above variables would cause investment funds to flow from ?

A. The united states to japan causing the dollar to depreciate
B. The united states to japan causing the dollar to appreciate
C. The japan to united states, causing the dollar to depreciate
D. The japan to united states, causing the dollar to appreciate

Given a system of floating exchange rates falling income in the United States would trigger a (an) ?

A. Increase in the demand for imports and an increase in the demand for foreign currency
B. Increase in the demand for imports and a decrease in the demand for foreign currency
C. Decrease in the demand for imports and an increase in the demand for foreign currency
D. Decrease in the demand for imports and a decrease in the demand for foreign currency

The asset market approach views exchange rates as being determined mainly by ?

A. The use of import tariffs and quotas by governments
B. The current account balance of each country
C. The relative growth rate of national output between countries
D. Efforts of investors to balance their portfolios among financial assets denominated in different currencies

The purchasing power parity theory has limitations in forecasting exchange rate fluctuations for all of the following reasons except ?

A. Inflation effects exchange rates
B. International capital flows affect exchange rates
C. Governments sometimes impose trade restrictions such as tariffs and quotas
D. Not all products are internationally tradeable

According to the asset market approach increased investor confidence in the Mexican economy would cause the peso to ?

A. Appreciate because of an increase supply of peso denominated assets
B. Depreciate because of an increased supply of peso denominated assets
C. Appreciated because of an increased demand for peso denominated assets
D. Depreciated because of an increased demand for peso denominated assets

Exchange rate overshooting often occurs because ?

A. Domestic prices adjust slowly to shifts in demand
B. Military spending during military conflicts
C. Elasticities are smaller in the long run than the short run
D. Elasticities are smaller in the short run than the long run