Question Details

Purchasing power parity or PPP says the ratios composed of



1.	Using demand and supply curves for the Japanese yen based on the $/Â¥ price for yen, an increase in US INFLATION RATES would
a.	Decrease the demand for yen and decrease the supply of the yen.		
b.	Increase the demand for yen and decrease the supply of the yen. 
c.	Increase the demand and increase the supply of yen.
d.	Decrease both the supply and the demand of yen.
e.	Have no impact on the demand or supply of the yen.

		

2.	If the British pound (₤) appreciates by 10% against the dollar:
a.	both the US importers from Britain and US exporters to Britain will be helped by the appreciating 	pound.		
b.	the US exporters will find it harder to sell to foreign customers in Britain. 
c.	the US importer of British goods will tend to find that their cost of goods rises, hurting its bottom line.
d.	both US importers of British goods and exporters to Britain will be unaffected by changes in foreign exchange rates.
e.	all of the above.

	

3.	Purchasing power parity or PPP says the ratios composed of: 
a.	interest rates explain the direction of exchange rates.
b.	growth rates explain the direction of exchange rates.
c.	inflation rates explain the direction of exchange rates.
d.	servicesexplain the direction exchange rates.
e.	public opinion polls explain the direction of exchange rates.

	

4.	If Ben Bernanke, Chair of the Federal Reserve Board, begins to tighten monetary policy by raising US interest rates next year, what is the likely impact on the value of the dollar?
	a.	The value of the dollar falls when US interest rates rise.
	b.	The value of the dollar rises when US interest rates rise.
	c.	The value of the dollar is not related to US interest rates.
	d.	This is known as Purchasing Power Parity or PPP.
	e.	The Federal Reserve has no impact at all on interest rates.

			

5.	If the domestic prices for traded goods rises 5% in Japan and rises 7% the US over the same period, what would happened to the Yen/US dollar exchange rate?   HINT:S1/S0 = (1+h) / (1+ f) where S0 is the direct quote of the yen at time 0, the current period.
a.	The direct quote of the yen ($/Â¥) rises, and the value of the dollar falls.
b.	The direct quote of the yen ($/Â¥) falls, and the value of the dollar rises.
c.	The direct quote of the yen would remain the same.
d.	Purchasing power parity does not apply to inflation rates.
e.	Both a and d.



Economics Assignment Help, Economics Homework help, Economics Study Help, Economics Course Help