SOLVED

1) An increase in the domestic real interest rate will tend to cause, other things the same ________. A) a depreciation of the domestic currency. B) an increase in the demand for domestic goods and services. C) an increase in demand for foreign currencies. D) an appreciation of the domestic currency. 2) Suppose the nominal exchange rate rises from 82 to 90. The domestic currency has appreciated by ________ percent. A) ten B) nine C) eight D) 86 3) An appreciation of the domestic currency can be caused by ________. A) a decrease in the domestic interest rate. B) an increase in the domestic interest rate and expectation of an increase in the value of the domestic currency. C) an increase in the domestic interest rate and the expectation of a decrease in the value of the domestic currency. D) the expectation of a decrease in the value of the domestic currency. 4) Other things the same, if participants in foreign exchange markets come to expect an increase in the value of the U.S. dollar ________. A) the actual value of the U.S. dollar will not be affected. B) the actual value of the U.S. dollar will fall. C) the actual value of the U.S. dollar will rise. D) one cannot predict the movement of the U.S. dollar in the future. 5) A rightward shift in the demand curve for domestic assets can be caused by ________. A) a decrease in the domestic real interest rate. B) a rightward shift in the supply curve for domestic assets. C) a leftward shift in the supply curve for domestic assets. D) an increase in the domestic real interest rate. 6) An increase in the foreign real interest rate will tend to cause, other things the same ________. A) individuals to hold fewer dollar assets. B) an increase in the return on dollar assets relative to foreign assets. C) an appreciation in the value of the U.S. dollar. D) an increase in the demand for dollars. 7) A decrease in the foreign real interest rate will tend to cause, other things the same ________. A) a decrease in the return on dollar assets relative to foreign assets. B) an increase in the demand for dollars. C) a depreciation of the domestic currency. D) individuals to hold fewer dollar assets. 8) A rise in the expected future exchange rate will tend to cause, other things the same ________. A) a depreciation of the domestic currency. B) no effect on the value of the U.S. dollar in the short-run. C) an appreciation of the domestic currency. D) no effect on the value of the U.S. dollar. 9) The belief that the U.S price level will rise in the future will tend to cause, other things the same ________. A) no change in the value of the U.S. dollar. B) an increase in the value of the U.S. dollar. C) no change in the value of the U.S. dollar in the short-run. D) a decrease in the value of the U.S. dollar. 10) For a U.S. economic agent, the expected return on U.S. dollars includes ________. A) the interest rate on dollar-denominated bank deposits. B) the expected value of the dollar relative to some other currency. C) the rate of exchange between the dollar and some other currency. D) the expected return on some other currency