SOLVED

1) The relative price of one currency in terms of another is known as the ________. A) nominal exchange rate. B) real exchange rate. C) domestic price level. D) real interest rate. 2) The relative price of goods in two countries is known as the ________. A) nominal exchange rate. B) real exchange rate. C) domestic price level. D) real interest rate. 3) Exchange rate transactions that involve the immediate transfer of bank deposits are known as ________. A) backward transactions. B) forward transactions. C) spot transactions. D) dog transactions. 4) Exchange rate transactions that involve the exchange of bank deposits at some specified date in the future are known as ________. A) backward transactions. B) dog transactions. C) sport transactions. D) forward transactions. 5) The spot exchange rate is relevant to transactions ________. A) that require an immediate transfer of funds. B) that require a future transfer of funds. C) that involve a movement across state lines. D) within a corporation, or between a corporate holding company and a subsidiary. 6) The forward exchange rate is relevant to transactions ________. A) that require an immediate transfer of funds. B) that require a future transfer of funds. C) that involve a transfer of funds within a corporate entity. D) crossing state lines. 7) An increase in the value of a country’s currency is known as ________. A) a spot exchange rate. B) a depreciation of its value. C) an appreciation of its value. D) a backward exchange rate. 8) A decrease in the value of a country’s currency is known as ________. A) a spot exchange rate. B) a depreciation of its value. C) an appreciation of its value. D) a forward spotting. 9) The real exchange rate is equal to the ________. A) nominal rate of exchange plus the domestic level of prices. B) the nominal exchange rate minus the relevant foreign price level. C) nominal exchange rate divided by the domestic plus foreign price levels. D) nominal exchange rate times the domestic price level divided by the foreign price level 10) Suppose that a haircut in your hometown costs $20, while the price for the same haircut in Mumbai is 600 Indian rupees. At which nominal exchange rate is the dollar price lower for the Mumbai haircut? A) 0.029$/Rs. B) 20Rs./$ C) 25Rs./$ D) 0.04$/Rs. 1