Decide whether each of the following are true or false. Choose either True or Fa

Question

Decide whether each of the following are true or false. Choose either True or False. The? "U.S. exchange?rate" is expressed as foreign? currency/dollar.

E)An increase in the U.S. demand for imports increases the demand for U.S. dollars.

F)Purchasing power parity implies that if the U.S. dollar can buy more goods in Japan than in the? U.S., the?yen/dollar exchange rate will fall.

G) If the Federal Reserve buys U.S.? dollars, the U.S. exchange rate rises.

H)The United States uses a crawling peg exchange rate system.

I) In order to keep its exchange rate? fixed, over the last decade the? People's Bank of China has bought billions of yuan a year.

J)For the last ten? years, the U.S. has had both a current account deficit and a financial account deficit.

Explanation / Answer

(E) false, an increase in the USdemand for imports increases the supply of US dollars

(F) true, here it means that prices in US are more than that is Japan so dollar exchange rate will fall

(G) true, if supply of money decreases, its value of currency appriciates and exchange rate rises

(H) false, there is floating exchange rate system in US that is determined by market forces. Crawling peg exchange rate system is in China

(I) false, china has had a currency peg for years,China is engaged in buying dollars and selling yuans. As a result, the central bank’s foreign exchange reserves increased from approx $600 billion in December 2004 to $3.8 trillion in December 2014.

(J) false, there is current account deficit in US but not financial account deficit in the last ten years

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