1a. In the foreign exchange market, a decrease in the world demand for Japanese exports
| a. shifts the demand curve for yen leftward, which causes the yen to appreciate. | |
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| b. shifts the demand curve for yen rightward, which causes the yen to appreciate. | |
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| c. shifts the demand curve for yen rightward, which causes the yen to depreciate. | |
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| d. shifts the demand curve for yen leftward, which causes the yen to depreciate. |
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1b. A relatively high rate of inflation in the United States will result in
| a. an appreciation of the dollar against foreign currencies in the short run. | |
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| b. a depreciation of the dollar against foreign currencies in the long run. | |
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| c. an appreciation of the dollar against foreign currencies in the long run. | |
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| d. a depreciation of the dollar against foreign currencies in the short run. |
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1c. The demand curve for euros in the foreign exchange market will increase (shift rightward) if
| a. European interest rates fall relative to foreign interest rates. | |
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| b. the current exchange value of the euro depreciates. | |
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| c. the rate of inflation in Europe is less than the rate of inflation throughout the world. | |
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| d. Europe increases tariffs and applies more stringent quotas on imported goods. |
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1d. The theory of purchasing power parity states that changes in the nominal exchange rate arise from differences in ______ among countries.
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| d. nominal interest rates |
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