1. Other things equal, what effect will an increase in the current account deficit have on the home currency value? Will it increase, decrease or remain the same? Please provide an explanation for your answer.
2. What effect on a country's current account balance is an increase in the use of quotas expected to have? Will it increase, decrease or remain the same? Please provide an explanation for your answer. Would your answer change if other governments retaliate? If so, how? Please explain.
3. Assume that a bank's bid rate on Euro is $1.45 and its ask rate is $1.47. What is its bid ask percentage spread?
4. Assume the Canadian dollar is equal to $.75 and the U.S. Dollar is equal to 1.35 Euro. What is the value of the Canadian dollar in Euros?
5. Which currency is used the most to denominate Eurobonds?
6. Assume that the U.S. places a strict quota on goods imported from Chile and that Chile does not retaliate. Holding other factors constant, this event will have what effect on U.S. demand for Chilean pesos? What effect on the value of the peso? Will it increase, decrease or remain the same? Please provide an explanation for your answers.
7. If a country experiences low inflation relative to the U.S., what is the expected effect on its exports to the U.S? Imports from the U.S.? Impact on its currency's equilibrium value? Will it increase, decrease or remain the same? Please provide an explanation for your answers.