The predictive accuracy of relative purchasing power parity improves if:
a. Both countries have highly mobile capital markets.
b. Both countries have central bank controls in place so that exchange rates change in an orderly manner.
c. Both countries under consideration have high growth rates.
d. Both countries are either developed or undeveloped (i.e., one is not developed and the other undeveloped).
e. You only are predicting the qualitative change in exchange rates and not the specific exchange rate or quantitative change in the exchange rate.
Question 2 - The U.S. dollar exchange rate is determined by the:
a. World Bank.
b. Federal Reserve.
c. Forces of supply and demand.
d. International Monetary Fund.
e. U.S. government.
Question 3 - The predictive accuracy of relative purchasing power parity improves if:
a. Both countries have highly mobile capital markets.
b. Both countries have central bank controls in place so that exchange rates change in an orderly manner.
c. Both countries under consideration have very high inflation rates.
d. Both countries under consideration have high growth rates.
e. Both countries are either developed or undeveloped (i.e., one is not developed and the other undeveloped).
Question 4 - In the dollar:pound foreign exchange market, is it always true that when the supply of dollars rises the demand for pounds rises?
a. Yes. This is always true.
b. No. It is not always true.
c. Like most things in life, it depends on a variety of other factors.
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