When the price of foreign currency (the exchange rate) is above the equilibrium level ?

Assume that a Big Mac hamburger cost $3 in the United States 2 pesos in Mexico The implied purchasing power parity exchange rate between the peso and the dollar is ?

A. 0.67 pesos = $1

B. 0.8 pesos = $1

C. 1.25 pesos = $1

D. 1.67 pesos = $1

Due to Japan’s high saving rate, suppose that the Japanese invest abroad. This investment may result in a/an _______ of the Japanese yen and therefore a for Japan?

A. appreciation; trade surplus

B. appreciation; trade deficit

C. depreciation; trade surplus

D. depreciation; trade deficit

Assume identical interest rates on comparable securities in the United States and foreign countries. Suppose investors anticipate that in the future the U.S dollar will depreciate against foreign currencies. investment funds would tend to ?

A. flow from the United States to foreign countries

B. flow from foreign countries to the United States

C. remain totally in foreign countries

D. remain totally in the United States

Starting from a position where the nation’s money demand equals the money supply and its balance of payments is in equilibrium its balance of payments would move into a surplus position if there occurred in the nation a (an) ?

A. decrease in the money supply

B. increase in the money supply

C. decrease in the money demand

D. None of the above

Which example of market expectations causes the dollar to appreciate against the yen– expectations that the U.S economy will have ?

A. faster economic growth than Japan

B. higher future interest rates than Japan

C. more rapid money supply growth than japan

D. higher inflation rates than japan