the economics of money, banking, and financial markets

583 #

© 2014 Pearson Canada Inc.#

5. 
   

   When Canadians or foreigners expect the return on dollar assets to be high relative to the
   return on foreign assets, there is a ____ demand for dollar assets and a correspondingly
   ____ demand for foreign assets.
   A) higher; higher
   B) higher; lower
   C) lower; higher
   D) lower; lower
   Answer: B
   Diff: 1 Type: MC Page Ref: 479
   Skill: Recall
   Objective List: 19.3 Identify the factors that lead to changes in the exchange rate in the short run

   
   


6. 
   

   An increase in the domestic interest rate causes the demand for domestic assets to shift to the
   ____ and the domestic currency to ____, everything else held constant.
   A) right; appreciate
   B) right; depreciate
   C) left; appreciate
   D) left; depreciate
   Answer: A
   Diff: 1 Type: MC Page Ref: 505
   Skill: Recall
   Objective List: 19.4 Understand the factors that change the exchange rate

   
   


7. 
   

   A decrease in the domestic interest rate causes the demand for domestic assets to ____
   and the domestic currency to ____, everything else held constant.
   A) increase; appreciate
   B) increase; depreciate
   C) decrease; appreciate
   D) decrease; depreciate
   Answer: D
   Diff: 1 Type: MC Page Ref: 479
   Skill: Recall
   Objective List: 19.4 Understand the factors that change the exchange rate

   
   


8. 
   

   A decrease in the domestic interest rate causes the demand for domestic assets to shift to the
   ____ and the domestic currency to ____, everything else held constant.
   A) right; appreciate
   B) right; depreciate
   C) left; appreciate
   D) left; depreciate
   Answer: D
   Diff: 1 Type: MC Page Ref: 479
   Skill: Recall
   Objective List: 19.4 Understand the factors that change the exchange rate