Questions from Financial Markets

Q: “A country is always worse off when its currency is weak

“A country is always worse off when its currency is weak (falls in value).” Is this statement true, false, or uncertain? Explain your answer.

Q: The president of the United States announces that he will reduce inflation

The president of the United States announces that he will reduce inflation with a new anti-inflation program. If the public believes him, predict what will happen to the exchange rate for the U.S. dol...

Q: If the British central bank prints money to reduce unemployment, what

If the British central bank prints money to reduce unemployment, what will happen to the value of the pound in the short run and the long run?

Q: If the Indian government unexpectedly announces that it will be imposing higher

If the Indian government unexpectedly announces that it will be imposing higher tariffs on foreign goods one year from now, what will happen to the value of the Indian rupee today?

Q: Assume you just deposited $1,000 into a bank account

Assume you just deposited $1,000 into a bank account. The current real interest rate is 2%, and inflation is expected to be 6% over the next year. What nominal rate would you require from the bank ove...

Q: If the demand for a country’s exports falls at the same time

If the demand for a country’s exports falls at the same time that tariffs on imports are raised, will the country’s currency tend to appreciate or depreciate in the long run?

Q: In the mid- to late 1970s, the yen appreciated relative

In the mid- to late 1970s, the yen appreciated relative to the dollar even though Japan’s inflation rate was higher than America’s. How can this be explained by an improvement in the productivity of J...

Q: If American auto companies make a breakthrough in automobile technology and are

If American auto companies make a breakthrough in automobile technology and are able to produce a car that gets 60 miles to the gallon, what will happen to the U.S. exchange rate?

Q: If the European central bank decides to contract the money supply to

If the European central bank decides to contract the money supply to fight inflation, what will happen to the value of the U.S. dollar?

Q: When the euro appreciates, are you more likely to drink California

When the euro appreciates, are you more likely to drink California or French wine?