1. Assume that you are a required to analyze foreign exchange rates for a large US MNC. The MNC exports goods to Turkey. Your job requires you to forecast the value of the Turkish lira. There is substantial trade transactions between Turkey and the US.
You will find a recent article discussing Turkish President Erdogan and Turkish economic policy attached to the Instructions setting at the top of the quiz. Analyze each of the following conditions and how it will affect the value of the lira, while holding other things equal.
President Erdogan is advocating the Turkish central bank to lower interest rates "despite plus seven percent inflation." Assume that the US inflation is stable. What does Erdogan's policy imply for Turkish inflation and the value of the lira?
Higher inflation and a decline in the value of the lira.
Higher inflation and an increase in the value of the lira.
Lower inflation and a decline in the value of the lira.
None of the above.
2. The price of oil has declined and lowered the Turkish current account by 29%. Assume the US is relatively oil independent. The lira will increase in value
True.
False.
3. The Turkish economy is forecasted to fall to less than 3% growth annually. The US economy is expected to remain constant. The lira will increase in value.
True.
False.
4. Assume Erdogan is successful in having the central bank lowering interest rates, while US interest rates remain stable. The lira will increase in value.
True.
False.