Questions from Financial Markets

Q: When the U.S. dollar depreciates, what happens to

When the U.S. dollar depreciates, what happens to exports and imports in the United States?

Q: If the balance in the current account increases by $2 billion

If the balance in the current account increases by $2 billion while the capital account is off $3.5 billion, what is the effect on governmental international reserves?

Q: Again, the Federal Reserve purchases $1,000,000

Again, the Federal Reserve purchases $1,000,000 of foreign assets. However, to raise the funds, the trading desk sells $1,000,000 in T-bills. Show the effect of this open market operation using T-acco...

Q: If the interest rate is 4% on euro deposits and 2

If the interest rate is 4% on euro deposits and 2% on dollar deposits, while the euro is trading at $1.30 per euro, what does the market expect the exchange rate to be one year from now?

Q: If the dollar begins trading at $1.30 per euro

If the dollar begins trading at $1.30 per euro, with the same interest rates given in Problem 3, and the ECB raises interest rates so that the rate on euro deposits rises by 1 percentage point, what w...

Q: You are willing to pay $15,625 now to purchase

You are willing to pay $15,625 now to purchase a perpetuity that will pay you and your heirs $1,250 each year, forever, starting at the end of this year. If your required rate of return does not chang...

Q: The Federal Reserve purchases $1,000,000 of foreign

The Federal Reserve purchases $1,000,000 of foreign assets for $1,000,000. Show the effect of this open market operation using T-accounts.

Q: “If a country wants to keep its exchange rate from changing

“If a country wants to keep its exchange rate from changing, it must give up some control over its money supply.” Is this statement true, false, or uncertain? Explain your answer.

Q: How can persistent U.S. balance-of-payments

How can persistent U.S. balance-of-payments deficits stimulate world inflation?

Q: Why did the exchange rate peg lead to difficulties for the countries

Why did the exchange rate peg lead to difficulties for the countries in the ERM when German reunification occurred?