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ECON_CH25.pdf

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Department
Administrative Studies
Course
ADMS 1010
Professor
All Professors
Semester
Winter

Description
University of LethbridgeDepartment of EconomicsECON 1012Introduction to MacroeconomicsInstructorMichael G LanyiCH 25Exch RateBofP1Foreign currency isAthe market for foreign exchangeBthe price at which one currency exchanges for another currencyCforeign notes coins and bank depositsDforeign notes and coins onlyEthe purchasing power of foreign moneyTopicCurrencies and Exchange Rates2The foreign exchange market isAmade up of importers exporters banks international travellers and specialist tradersBthe place where people exchange the currencies of different countriesCthe market in which approximately 400 trillion in foreign exchange is traded each yearDboth A and C are correctEboth A and B are correctTopicCurrencies and Exchange Rates3The exchange rate is theAvolume of currency exchanged between importers and exportersBprice at which one currency exchanges for another currencyCrate of currency appreciation or depreciationDpercentage change in the volume of currency exchangesEaverage rate at which foreign currencies are exchangedTopicCurrencies and Exchange Rates4If the Canadian dollar depreciates it means thatAone Canadian dollar buys less foreign currencyBinflation has eroded the purchasing power of Canadian moneyCCanadas nominal exchange rate fallsDboth A and C are correctEall of the above are trueTopicCurrencies and Exchange Rates5Suppose that the Canadian dollar exchanges for 090 US dollars and also for 065 Euros A US dollar exchanges forA100 EuroB155 EurosC025 EurosD139 EurosE072 EurosTopicCurrencies and Exchange Rates16If the exchange rate is 88 US cents per Canadian dollar thenAthe Canadian dollar is cheaper than the US dollarBthe US dollar is more expensive than the Canadian dollarCthe Canadian dollar will appreciateDone US dollar will buy 114 Canadian dollarsEone US dollar will buy 088 Canadian dollarsTopicCurrencies and Exchange Rates7Currency depreciation is a reduction in theAprecious metal content in coins such as the replacement of silver with copper in quartersBgoods and services a currency can purchase within its own country usually the result of a period of inflationCamount of foreign currency that can be obtained in trade for each unit of domestic currencyDamount of domestic currency that must be exchanged for a unit of foreign exchangeEamount of domestic goods foreign currency can purchaseTopicCurrencies and Exchange Rates8Appreciation of a currency meansAan increase in the amount of goods and services that currency can purchase within its own countryBan increase in the precious metal content in coinsCa shortage of currencyDthat currency can buy more foreign currencyEthat currency can buy less foreign currencyTopicCurrencies and Exchange Rates9Between 2002 and 2007 the Canadian dollarAdepreciated against the US dollarBappreciated against the US dollarCremained constant against the US dollarDwas not able to vary against the US dollar because the exchange rate was fixed against the Japanese yenEbought the same number of US dollars as the EuroTopicCurrencies and Exchange Rates10The market in which the currency of one country is exchanged for the currency of another country is theAmoney marketBcapital marketCforeign exchange marketDforward exchange marketEinternational trading marketTopicCurrencies and Exchange Rates2
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