The following is from the Online Wiley CPA Test Bank.
- A short-term speculative rise in the worldwide value of domestic currency could be moderated by a central bank decision to
A: Sell domestic currency in the foreign exchange market.
B: Buy domestic currency in the foreign exchange market.
C: Sell foreign currency in the foreign exchange market.
D: Increase domestic interest rates.
- If the US dollar declines in value relative to the currencies of many of its trading partners, the likely result is that
A: Foreign currencies will depreciate against the dollar.
B: The US trade deficit will worsen.
C: US exports will tend to increase.
D: US imports will tend to increase.
- Which of the following changes would create pressure for the Japanese yen to appreciate relative to the US dollar?
A: An increase in incomes in Japan.
B: A change in US tastes in favor of Japanese goods.
C: A decrease in US incomes.
D: A change in Japanese tastes in favor of US goods.
- The real risk-free rate
A: Includes a default premium.
B: Assumes that inflation is expected.
C: Includes a liquidity premium.
D: Is the basic component of interest.
- Exchange rates are determined by
A: Each industrial country's government.
B: The International Monetary Fund.
C: Supply and demand in the foreign exchange market.
D: Exporters and importers of manufactured goods.