Suppose we were analyzing the Turkish lira per euro foreign exchange market. If the Euro-Area's price level falls relative to Turkey and nothing else changes, then the:
a. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing a depreciation of the euro.
b. The supply of euros in the foreign exchange market falls, and the demand for euros in the foreign exchange market falls, causing an uncertain change in the value of the euro.
c. The supply of euros in the foreign exchange market falls, and the demand for euros in the foreign exchange market rises, causing an appreciation of the euro.
d. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
e. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market rises, causing an uncertain change in the value of the euro.
Question 2 - Suppose we were analyzing the Turkish lira per euro foreign exchange market. If the Euro-Area's price level falls relative to Turkey and nothing else changes, then the:
a. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing an appreciation of the euro.
b. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market rises, causing an uncertain change in the value of the euro.
c. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing a depreciation of the euro.
d. The supply of euros in the foreign exchange market falls, and the demand for euros in the foreign exchange market rises, causing an appreciation of the euro.
e. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
Question 3 - Suppose we were analyzing the Turkish lira per euro foreign exchange market. If Turkey's real GDP falls relative to the Euro-Area and nothing else changes, then the:
a. The supply of euros in the foreign exchange market rises, and the euro depreciates.
b. The demand for euros in the foreign exchange market rises, and the euro appreciates.
c. The demand for euros in the foreign exchange market falls, and the euro depreciates.
d. The supply of euros in the foreign exchange market falls, and the demand for euros in the foreign exchange market falls, causing the euro to rise in value.
e. The supply of euros in the foreign exchange market rises, and the demand for euros in the foreign exchange market falls, causing the euro to fall in value.
Question 4 - Suppose we were analyzing the pound per Swiss franc foreign exchange market. If there is the expectation that the Swiss franc will rise in value in the near future, then in the spot market:
a. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market rises, causing an appreciation of the Swiss franc.
b. The supply of Swiss francs in the foreign exchange market rises, and the demand for Swiss francs in the foreign exchange market falls, causing a depreciation of the Swiss franc.
c. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc.
d. Neither supply nor demand in the foreign exchange market change because relative international prices influence trade flows and not the exchange rate.
e. The supply of Swiss francs in the foreign exchange market falls, and the demand for Swiss francs in the foreign exchange market falls, causing an uncertain change in the value of the Swiss franc.
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