ForEx Review Quiz Appreciation vs Depreciation - PowerPoint Presentation

Slide1

ForEx

Review Quiz

Appreciation vs Depreciation

Exports (X) vs Imports (M)

Supply vs Demand

Dogs and Cats Living together – Mass Hysteria…Slide2

1. (1 point) A tsunami wrecks havoc on the Fukijima Power Plant, causing a decrease in tourism.

Draw what will happen to the supply of the Japanese Yen ( ).Slide3

Yen

D – DecreaseS – IncreaseSlide4

2. (3 points) The U.S. Government engages in Expansionary Fiscal Policy. They borrow massive amounts of money to pay for projects. This drives up real interest rates (r%).

How does the increase in r%(

think bonds

) affect

demand for the U.S.

Dollar?

Draw this.

How does this affect X (exports), and M (imports)?Slide5

U.S. Dollar

D – Increase

S –

Decrease

Appreciation of the U.S. Dollar causes X to decrease and M to increase.Slide6

3. (1 point) Switzerland is experiencing high inflation.

Draw the affects on Demand for U.S. Dollar and Supply of the Swiss Franc ( ).Slide7

Swiss Franc

D – DecreaseS – Increase

U.S. Dollar

D – Increase

S – DecreaseSlide8

4. (2 points, 2 answers) Due to rich snowfall

on the ski-slopes of Colorado, the U.S. dollar appreciates. Who would this benefit?

A hotel owner in New York

A hotel owner in Venice (Italy)

An Importer

An ExporterSlide9

Answers:

A hotel owner in New YorkA Hotel owner in Venice (Italy)

An Importer

An ExporterSlide10

5. (1 point) How would inflation in Germany affect the market for the Chinese Yuan ( ) ?

Draw a Supply chart for the Yuan.Slide11

Yuan

D – IncreaseS – DecreaseSlide12

6. (2 points) If there is Inflation in Germany how does this affect X and M in Germany?

How does this affect X and M in South Korea?Slide13

Germany:

X – DecreaseM – IncreaseSouth Korea:

X – Increase

M – DecreaseSlide14

7. (1 point) What would cause the value of the Indian Rupee to Appreciate?

A. Demand for

India’s exports

increases

B.

India’s money

supply increases

C.

India’s

citizens increase their travel abroad

D.

Domestic

interest rates decrease

E.

Tariffs

on the country’s imports decreaseSlide15

Answer:

A. Demand for India’s exports increasesB. India’s money supply increasesC. India’s citizens increase their travel abroad

D. Domestic interest rates decrease

E. Tariffs on the country’s imports decreaseSlide16

8. (2 points) Which

of the following is likely to occur following appreciation of the Greek Drachma?

A. Greek imports will increase

B

.

Greek exports

will

increase.

C

. Demand for the

Drachma will increase.

D. Greek

demand for foreign currencies will

decrease.

E

.

Greek

goods will become cheaper in foreign

markets

.Slide17

Answers:

A.

Greek imports

will increase

B. Greek exports will increase.

C. Demand for the

Drachma

will increase.

D. Greek demand for foreign currencies

will decrease

.

E. Greek goods will become cheaper in foreign markets.Slide18

9. (3 points) A rise on interest rates (r%) in Japan has occurred to support rebuilding of the Fukijima nuclear plant.

Draw this affect on supply and demand for the Japanese Yen.Draw this affect on supply and demand for the U.S. Dollar.Slide19

Japanese Yen

D – IncreaseS – Decrease

U.S. Dollar

D – Decrease

S – IncreaseSlide20

10. (3 points) The U.S. Federal Reserve has undertaken Expansionary Monetary Policy. As a result lending activity has increased and businesses are expanding.

Draw the effects of this on supply and demand of the U.S. Dollar.Draw the effects of this on supply and demand of the Euro.Slide21

U.S. Dollar

D – DecreaseS – IncreaseEuro

D – Increase

S – DecreaseSlide22

Bonus:

How does this “easy money” policy affect the U.S. Bond market?Slide23

Answer:

Real Interest Rates (r%) would decrease.Business benefit from low interest rates in the loanable funds market (bank loans).