Question $17$

$25$ pts

and price of GBP will $($BLANK$).$

Increase, not change, increase

decrease, not change, decrease

decrease, increase, decrease

not change, increase, decrease

increase, decrease, increase

Question $18$

$2\mathrm{.}5$ pts

If the Canadian govemment decreased quotas on American pharmaceuticals sold in Canada, and everything else remains constant, then in the FX market the demand schedule for CAD will $($BLANK$),$ the supply schedule for CAD will $($BLANK$),$ and price of CAD will $($BLANK$).$

$$ not change, increase, decrease

$$ increase, not change, increase

$$ decrease, not change, decrease

$$ not change, decrease, increase

Question $19$

$2\mathrm{.}5pt$

A currency speculator expects the spot rate of Euros to change from $$1\mathrm{.}00$ to $$0\mathrm{.}95$ in one year Assume the speculator has access to credit lines of $$10,000,000$ in the US and EUR $10,000,000$ in Europe. The annual borrowing and lending rates are $8\%$ in US and $6\%$ in Europe. If his forecast turns out be to true, at the end of the one$-$year period, the speculator's expected profit will be:

EUR $768,421$

USD $768,421$

EUR $357,895$

USD $357,895$