econ 162 principle of macroecon
QUESTION 1
If $1.00 trades for 100 yen and 1 yen trades for .05 euros, then $1.00 should trade for 5 euros.
True
False
QUESTION 2
Purchasing Power Parity theory
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a. |
means that you can profit by taking advantage of differences in exchange rates at a given point in time. |
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b. |
means that currencies should have the same purchasing power in different countries. |
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c. |
means that prices should be identical in different countries. |
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d. |
means that exchange rates are inverses of each other. |
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e. |
all of the above |
QUESTION 3
Suppose that an ounce of gold sells for $2000 in the United States and 1000 euros in France. A euro currently trades for $1.50 . it costs $100 to ship an ounce of gold between the two countries. Assume it is legal to buy and ship gold in both countries. Then
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a. |
it is not possible to profit from international arbitrage. |
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b. |
you can profit by buying gold in the United States and shipping it to France. |
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c. |
you can profit by buying gold in France and shipping it to the United States. |
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d. |
the price of gold will rise in the United States. |
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e. |
the dollar will appreciate. |
