1. If Mexico wants to maintain a fixed exchange rate or one peso per euro, it sh
ID: 1206554 • Letter: 1
Question
1. If Mexico wants to maintain a fixed exchange rate or one peso per euro, it should ____ (sell/buy) euros in the foreign exchange market. To be successful, this policy would have to ____(decrease the supply of/decrease the demand for/increase the demand for/increase the supply of) euros by ___ billion euros at any given exchange rate.2. If investors believe the peso is going to be _____ a speculative attack may occur. A. Maintained B. Revalued C. Devalued
3. True or false: in the event of a successful speculative attack, foreign investors tend to suffer because Mexican businesses are less able to pay their foreign debts.
4. One of the contributing factors to the global financial crisis of 2007-2008 was that European banks were highly invested in U.S mortgages. Select which contains information that accurately describes most economists' suggestion for avoiding this problem.
A. Financial institutions could have been better regulated. B. Banks could have insulated themselves from foreign crises by not investing internationally.
5. Suppose you are considering whether to invest in a country A or country B. You know that both countries have fixed exchange rates, and that there is more government transparency in country A than country B. Based on this information alone, country ____ (A or B) appears to be a less risky place in which to invest.
6. True or false: a country with a fixed exchange rate is less at risk for crisis if its stock of international reserves has been relatively constant than if it is has been falling.
Explanation / Answer
1. If Mexico wants to maintain a fixed exchange rate or one peso per euro, it should ____ sell euros in the foreign exchange market. To be successful, this policy would have to ____Increase the supply of euros by 2 ___ billion euros at any given exchange rate.
2. If investors believe the peso is going to be _____ a speculative attack may occur.
B. Revalued
3. false: in the event of a successful speculative attack, foreign investors tend to suffer because Mexican businesses are less able to pay their foreign debts.
4. One of the contributing factors to the global financial crisis of 2007-2008 was that European banks were highly invested in U.S mortgages. Select which contains information that accurately describes most economists' suggestion for avoiding this problem.
B. Banks could have insulated themselves from foreign crises by not investing internationally.
5. Suppose you are considering whether to invest in a country A or country B. You know that both countries have fixed exchange rates, and that there is more government transparency in country A than country B. Based on this information alone, country ____ A appears to be a less risky place in which to invest.
6. True : a country with a fixed exchange rate is less at risk for crisis if its stock of international reserves has been relatively constant than if it is has been falling.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.