A U.S. resident purchases a bond issued by the Canadian government. If the Canadian dollar appreciates relative to the U.S. dollar over the term of the bond, the U.S. investor will:
A. not see her return affected since exchange rates are flexible.
B. see a lower return on her investment as a result.
C. see a higher return on her investment as a result.
D. none of the answers provided is correct.
Answer: C
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Based on the theory of purchasing power parity, in the long run, currencies of countries with significant inflation will tend to:
A. be flexible. B. appreciate. C. have nominal exchange rates. D. depreciate.
The benefit from an additional unit of a good or service that society receives from the consumption of that good or service is the
A) marginal private benefit. B) marginal external benefit. C) marginal social benefit. D) opportunity cost.
Briefly distinguish between a forward foreign exchange contract and a currency futures contract.
What will be an ideal response?
U.S. exports represent two flows:
A. An outflow of goods or services, and an outflow of payments B. An inflow of goods or services, and an outflow of payments C. An outflow of goods or services, and an inflow of payments D. An inflow of goods or services, and an inflow of payments