Deficits in the _______ are referred to as the twin deficits.

government and private sectors
government sector and current account
capital account and the current account
international borrowing and international trade sectors

The market in which the currency of one country is exchanged for the currency of another country is the ______________.

foreign exchange market
G7
foreign currency market
Montreal Money Exchange

Suppose that $1 Canadian can buy $0.69 U.S. and $1 U.S. can buy $1.45 Canadian. These are examples of __________________.

changes in the prices of net exports
purchasing power of parity
currency appreciation
foreign exchange rates

Between 1976 and 1986, the Canadian dollar _______ against the U.S. dollar; and between 1986 and 1991, the Canadian dollar _______ against the U.S. dollar.

value changed little; value changed a lot
appreciated; depreciated
trended upward; trended downward
depreciated; appreciated

The Canadian interest rate minus the foreign interest rate is called the ___________________.

foreign interest rate differential
Canadian bond rate differential
Canadian stock yield differential
Canadian interest rate differential

If the exchange rate rises, there is a _______ the demand curve for Canadian dollars, and if the expected future exchange rate falls, there is a _______ the demand curve for Canadian dollars.

movement downward along; rightward shift of
movement upward along; movement upward along
leftward shift; leftward shift of
movement upward along; leftward shift of

The supply curve of Canadian dollars shifts leftward. This could have been influenced by _______________.

an increase in the Canadian exchange rate
a fall in the expected future exchange rate
a decrease in the Canadian interest rate differential
a rise in the expected future exchange rate

Suppose that $1 U.S. costs $1.50 Canadian. If in St. Louis a CD costs $10 and in Montreal it costs $15, then __________________.

Virgin Records will have an incentive to build more stores in North America
Americans will buy CDs in Montreal
Canadians will buy CDs in St. Louis
purchasing power parity exists

If in Chicago the interest rate is 5 percent a year and in Vancouver it is 6 percent a year, ____________________.

the quantity of Canadian dollars purchased will increase
interest rate parity does not exist
interest rate parity exists, and the U.S. dollar is expected to depreciate
the Canadian dollar is expected to depreciate

If the Bank of England wants to depreciate the British pound against the Canadian dollar, it will ________________.

sell foreign exchange
buy British pounds
decrease the money supply
sell British pounds

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