Hey guys attached are practice questions for International Finance Exam. I desperately need help with these please. It would be great if you guys can help. Thank you.

Course ID: 105515 Section A (Answer at least ONE from the FOUR questions in this Section) 1) a) 'Asset prices jump but goods prices don't'. Explain what this statement means in the context of the Dornbusch model of exchange rates. Show how sticky good prices allow exchange rates to overshoot in this model. (4 marks) b) Using a four quadrant diagram, provide a detailed short, medium and long run analysis of the economic consequences of an attempted monetary contraction, using the Dornbusch Model. (8 marks) c) To what extent can the Dornbusch Model be seen as a synthesis of the Mundell Fleming and monetary models of exchange rates? In what ways was the Dornbusch model an advance on these prior models? (4 marks) d) Identify the principal limitations of the Dornbusch Model as an analytical tool for policy makers and currency market speculators. (4 marks) (Maximum 20 marks) tute 6 2) a) What were the Meese and Rogoff results, and what implications did these results have for those trying to use models like the Monetary Model to forecast movements in floating exchange rates? (4 marks) c) Many modern central banks set interest rates by managing the supply of base money to the banking system, to hold the overnight interest rate at some target level, set within a corridor. How is this done in Australia, and what is the interest rate corridor in our financial system? (6 marks) d) Identify the potential limitations of quantitative easing as a tool of monetary stimulus, and a plausible transmission mechanism by which quantitative easing might have an impact on the macroeconomy. (4 marks) Page 1 of 1 See next page Course ID: 105515 (Maximum 20 marks) tute 1 3) a) In what ways was the Bretton Woods System similar to the Classical Gold Standard, and how did these systems differ? (4 marks) b) What was the Triffin Dilemma under the Bretton Woods System? What are its implications for potential global reserve currencies today? What would need to be true of the Chinese yuan before it could challenge the US dollar as the principal global reserve currency? (4 marks) c) What is the 'impossibly trinity' of exchange rate policy? What is its relevance to the recent decision taken by the Swiss central bank to allow its currency to appreciate against the Euro? (4 marks) d) Illustrate and explain the 'impossible trinity' problem within the following theoretical exchange rate models (i) (ii) the long run monetary model the Mundell-Fleming Model with imperfect capital mobility (8 marks) (Maximum 20 marks) 4) a) 'There has long been evidence of systematic and persistent deviations from the predictions of absolute purchasing power parity theory'. Provide and explain in full a plausible reason for the currencies of low income countries to have been persistently undervalued against the US dollar, compared to the predictions of purchasing power parity. (8marks) b) According to a survey of New York currency dealers, which was published in the year 2000, the majority of dealers view relative purchasing power parity as being of no more than academic value as a means for understanding movements in exchange rates. Explain the extent to which this view is justified, and any evidence that it might Page 2 of 2 See next page Course ID: 105515 not be completely justified. What problems of causation exist when assessing relative purchasing power parity theory? (4 marks) c) Distinguish between covered and uncovered interest rare parity theory. Discuss the evidence for and limitations of interest rate parity theory. What is meant by the term 'time varying risk premium', in the context of neoclassical exchange rate theories? (6 marks) d) What is meant by the term 'long run money neutrality', and what role does it play in neoclassical exchange rate theories? (2 marks) (Maximum 20 marks) Section B (Answer at least ONE from the FOUR questions in this Section) 5) Foreign exchange markets are made up of traders whose decisions depend on the mental models governing their expectations of future exchange rate movements. They are subject to heuristics and biases in their thinking. Markets involve an interplay between technical analysis (or chartists) and fundamental analysts (who are influenced by anchors when forecasting future exchange rates). Tute 7 a) Distinguish between chartism and fundamental analysis as foreign exchange trading strategies, and explain why most traders employ a mix of such strategies over time. (4 marks) b) Describe and explain the possible consequences of an interplay between chartists and fundamental analysis. (4 marks) Page 3 of 3 See next page Course ID: 105515 c) Draw and explain the Value function from Kahneman and Tversky's prospect theory of decision making under risk and uncertainty. How is the function related to (i) mental accounting (ii) loss aversion (iii) risk seeking over losses? How can prospect theory explain the evidence for profit taking by traders and the need for position limits on traders, in foreign exchange and other speculative asset markets? (8 marks) d) Identify and explain an implication for policy makers of your discussion in parts a) to c). (4 marks) (Maximum 20 marks) 6) a) Explain the gradients and main shift variables for each of the quadrants of the four quadrant Post-Keynesian exchange rate model. (4 marks) b) Use the model to analyse the possible impact on nominal GDP, employment, the rate of interest and the exchange rate of (i) A monetary contraction (4 marks) (ii) A fiscal expansion (4 marks) (iii) An expected currency appreciation (4 marks) c) What is Thirlwall's Law and what is its significance? (4 marks) Page 4 of 4 See next page Course ID: 105515 (Maximum 20 marks) 7) a) In what sense can all financial crises be seen as manifestations of the same phenomenon? (2 marks) b) We have identified three possible types of financial crises. Distinguish between them. Identify their principal causal factors, negative repercussions, and possible secondary effects. (12 marks) c) Suppose Greece was able to leave the euro-zone and to devalue its currency (or allow it to depreciate) with no significant initial adjustment costs. Apply the Marshall-Lerner Condition and the J-Curve to discuss the potential economic consequences of such a 'Grexit'. (6 marks) (Maximum 20 marks) 8) a) Starting from floating exchange rates, zero net capital flows and balanced trade Assume major trading partners target export-led growth, purchasing assets in your financial system. What are the possible consequences for economic growth, monetary policy and financial fragility, and the government budget? (8 marks) b) Using the four quadrant and mental models, analyse the possible factors contributing to the weakness of the euro against the US dollar between 2008 and 2015. (6 marks) Page 5 of 5 See next page Course ID: 105515 c) Identify the principal weaknesses of the euro-zone as a currency area, and provide brief recommendations for the reform of the euro-zone to mitigate or eliminate these weaknesses. (6 marks) (Maximum 20 marks) Page 6 of 6 See next page