One
purpose of regulation of financial markets is to

7. When Americans or foreigners expect the return on dollar assets to be high relative to the return on foreign assets, there is a demand for dollar assets and a correspondingly demand for foreign assets.

6. The theory of asset demand suggests that the most important factor affecting the demand for domestic and foreign assets is

5. Assume that the following are the predicted inflation rates in these countries for the year: 2% for the United States, 3% for Canada; 4% for Mexico, and 5% for Brazil. According to the purchasing power parity and everything else held constant, which of the following would we expect to happen?

4. The theory of PPP suggests that if one countryʹs price level rises relative to anotherʹs, its currency should

3. Everything else held constant, when a countryʹs currency depreciates, its goods abroad become ________ expensive while foreign goods in that country become ________expensive.

2. When the value of the British pound changes from $1.25 to $1.50, the pound has ____and the U.S. dollar has _____.

1.The immediate ( ) exchange of one currency for another is a

10. A borrowed reserves target is ______because increases in income _______interest rates and discount loans, causing the Fed to_______the monetary base, everything else held constant.

9. The Federal Reserve has been _______preemptive because of the changing view that monetary policy has to be _______looking.

8. Targeting interest rates can be procyclical because