« previous next »

Author Question: Discuss the effects of a rise in the interest rate paid by euro deposits on the exchange rate. ... (Read 42 times)

jeatrice

  • Hero Member
  • *****
  • Posts: 543
on: Jun 30, 2018
Discuss the effects of a rise in the interest rate paid by euro deposits on the exchange rate.
 
  What will be an ideal response?

Question 2

Movements in GDP
 
  A) differ greatly from movements in GNP.
  B) do not differ greatly from movements in GNP.
  C) are not allowed to differ at all from movements in GNP by definition.
  D) need to be inflation adjusted in order to match movements in GNP.
  E) are not relevant to an examination of national income.


frre432

  • Sr. Member
  • ****
  • Posts: 347
Reply #1 on: Jun 30, 2018
Answer to Question 1

There are two effects to consider. If we make the unrealistic assumption that the expected exchange rate will not change, then a rise in the interest rate paid by Euro deposits causes the dollar to depreciate. However, if the expected exchange rate were to rise, then the current exchange rate would also rise. (See Figure 14-6 from the text.)

Answer to Question 2

B


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

Did you know?

The lipid bilayer is made of phospholipids. They are arranged in a double layer because one of their ends is attracted to water while the other is repelled by water.

Did you know?

In ancient Rome, many of the richer people in the population had lead-induced gout. The reason for this is unclear. Lead poisoning has also been linked to madness.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Did you know?

Autoimmune diseases occur when the immune system destroys its own healthy tissues. When this occurs, white blood cells cannot distinguish between pathogens and normal cells.

Effects of introduced parasites on American chestnut trees. Effects of introduced parasites on American chestnut trees.
Static Stability & Environmental Lapse Rate Static Stability & Environmental Lapse Rate
Fluidization - Reaction Rate Chart Fluidization - Reaction Rate Chart
Total Fertility Rate in Japan: Actual versus Forecast Total Fertility Rate in Japan: Actual versus Forecast
Time spent on, paid work and housework, by living arrangements of Canadian Time spent on, paid work and housework, by living arrangements of Canadian
The consequences of a single exchange between two nonsister chromatids The consequences of a single exchange between two nonsister chromatids
Video: Central Nervous System Animation

For a complete list of videos, visit our video library