Exam 3 part 1A Flashcards
With the start of the subprime financial crisis in August 2007, the dollar ________ in value against the euro as the Fed lowered interest rates. By December of 2008, with the financial crisis spreading throughout Europe, foreign central banks cut their interest rates, leading to a ________ in the value of the dollar relative to the euro.
declined; rise
If the inflation rate in the United States is higher than that in Germany and productivity is growing at a slower rate in the United States than it is in Germany, in the long run,
the euro should appreciate relative to the dollar.
Quotas
re restrictions placed on the quantity of foreign goods that can be exported.
are fees placed on imported goods.
are restrictions placed on the quality of foreign goods that can be imported
NONE
Trades in the foreign exchange market consist of transactions in excess of
$1 million.
American firms became less competitive compared to foreign firms during the 1980s because
the U.S. dollar became worth more in terms of foreign currencies.
When the exchange rate for the euro changes from $1.20 to $1.00, then, holding everything else constant, the euro has
depreciated and American wheat sold in Germany becomes more expensive.
In the long run, a rise in a country’s price level (relative to the foreign price level) causes its currency to ________, while a rise in the country’s relative productivity causes its currency to ________.
depreciate; appreciate
Increased demand for a country’s ________ causes its currency to appreciate in the long run, while increased demand for ________ causes its currency to depreciate.
exports; imports
When the exchange rate changes from 1.0 euros to the dollar to 1.2 euros to the dollar, the euro has ________ and the dollar has ________.
depreciated; appreciated
Over short periods, the ________ has a much greater role in exchange rate determination than does ________.
decision to hold domestic or foreign assets; the demand for exports and imports
