Absolute purchasing power parity (PPP) holds for a product bundle if

Multiple Choice

• the goods are traded with minimum transportation costs.
• the bundle costs the same number of U.S. dollars in different countries.
• there exists free trade of all the products that comprise the bundle.
• the law of diminishing returns holds for all the goods in the bundle.

What implications for international financial repositioning and for the current spot exchange rate would flow from a decrease in the expected future spot rate value of a country's currency?

Multiple Choice

• Repositioning toward foreign currency assets results in this country's currency appreciating.
• Repositioning toward foreign currency assets results in this country's currency depreciating.
• Repositioning towards this country's currency assets results in the country's currency appreciating.
• Repositioning towards this country's currency assets results in the country's currency depreciating.

The monetary approach to exchange rates is generally

Multiple Choice

• successful in explaining short- and long-term exchange rates.
• successful in explaining short-term exchange rates but not long-term exchange rates.
• of no value for explaining short- or long-term exchange rates.
• successful in explaining long-term exchange rates but not short-term exchange rates.

The expected overall return on an uncovered investment in a bond denominated in a foreign currency depends on the

Multiple Choice

• economic health of the company issuing the bond and the world economic situation.
• political stability of the nation where the bond is issued and the exchange rate.
• basic return on the bond and the expected gain or loss on currency exchanges.
• exchange rate and the world economic situation.

The primary demand for money is

Multiple Choice

• in developing countries.
• for foreign direct investment.
• as a medium of exchange.
• for a country's international reserves.