1: What is meant by the FOREX market? Question 2: What is a fixed or pegged exchange rate? Question 3: For each of the following, choose "appreciate or depreciate" as the correct answer: When a currency increases in value against another currency. When a currency decreases in value against another currency. Question 4: Complete the following chart for the exchange rate between the USD and the Euro. For each situation, check the boxes that apply and tell if it is an increase or decrease. Then tell if the USD has appreciated or depreciated against the Euro. Copy the chart and fill in. USD Demand USD Supply Euro Demand Euro Supply USD appreciates or depreciates against the Euro. Americans increase their interest in traveling to Paris. The European Union enjoys an increase in income compared to the US. The US experiences inflation. Interest rates in Europe decrease compared to interest rates in the US. Question 5: Mexicans are enjoying an increase in incomes. What will happen to the USD as compared to the peso? Answer this by drawing two diagrams, one for the peso and one for the USD. Question 6: Interest rates in Canada increase compared to those in the US. What will happen to the USD as compared to the CAD? Answer this by drawing the two diagrams, one for the USD and one for the CAD. Question 7: What is the Rational Choice Theory? Question 8: Interest rates in Canada are higher than those in the US. What will happen to the loanable funds market in each country? What will happen to the exchange rate in each country? Fill in the chart: What shifts in the loanable funds market? What happens to the interest rate as a result? What shifts in the exchange rate diagram? What happens to the exchange rate (appreciate or depreciate) for the CAD as compared to the USD? Canada US Question 9: Summarize how the interest rate of a nation affects the flow of financial capital into and out of a country