国际金融Finance_Test_Bank_8

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1、Chapter8—RelationshipsamongInflation,InterestRates,andExchangeRates1.Assumeatwo-countryworld:CountryAandCountryB.Whichofthefollowingiscorrectaboutpurchasingpowerparity(PPP)asrelatedtothesetwocountries?a.IfCountryA'sinflationrateexceedsCountryB'sinflationrate,

2、CountryA'scurrencywillweaken.b.IfCountryA'sinterestrateexceedsCountryB'sinflationrate,CountryA'scurrencywillweaken.c.IfCountryA'sinterestrateexceedsCountryB'sinflationrate,CountryA'scurrencywillstrengthen.d.IfCountryB'sinflationrateexceedsCountryA'sinflationr

3、ate,CountryA'scurrencywillweaken.ANS:APTS:12.Givenahomecountryandaforeigncountry,purchasingpowerparity(PPP)suggeststhat:a.ahomecurrencywilldepreciateifthecurrenthomeinflationrateexceedsthecurrentforeigninterestrate.b.ahomecurrencywillappreciateifthecurrenthom

4、einterestrateexceedsthecurrentforeigninterestrate.c.ahomecurrencywillappreciateifthecurrenthomeinflationrateexceedsthecurrentforeigninflationrate.d.ahomecurrencywilldepreciateifthecurrenthomeinflationrateexceedsthecurrentforeigninflationrate.ANS:DPTS:13.Thein

5、ternationalFishereffect(IFE)suggeststhat:a.ahomecurrencywilldepreciateifthecurrenthomeinterestrateexceedsthecurrentforeigninterestrate.b.ahomecurrencywillappreciateifthecurrenthomeinterestrateexceedsthecurrentforeigninterestrate.c.ahomecurrencywillappreciatei

6、fthecurrenthomeinflationrateexceedsthecurrentforeigninflationrate.d.ahomecurrencywilldepreciateifthecurrenthomeinflationrateexceedsthecurrentforeigninflationrate.ANS:APTS:14.Becausethereareavarietyoffactorsinadditiontoinflationthataffectexchangerates,thiswill

7、:a.reducetheprobabilitythatPPPshallhold.b.increasetheprobabilitythatPPPshallhold.c.increasetheprobabilitytheIFEwillhold.d.BandCANS:APTS:15.Becausetherearesometimesnosubstitutesfortradedgoods,thiswill:a.reducetheprobabilitythatPPPshallhold.b.increasetheprobabi

8、litythatPPPshallhold.c.increasetheprobabilitytheIFEwillhold.d.BandCANS:APTS:16.AccordingtotheIFE,ifBritishinterestratesexceedU.S.interestrates:a.theBritishpound'svaluewillremainconstant.b