1) Describe why you agree with following given statements:
a) A country which grows faster rather than its major trading partners may expect the international value of its currency to degrade.
b) A nation whose interest rate is increasing more rapidly than the interest rates in other nations may expect the international value of its currency to grown faster.'
c) A currency of the country will increase if its inflation rate is less than that of the rest of the world.
2) Exports pay for imports. Yet in the year 1999 nations of the world exported around $346 billion more worth of the goods and services to United States rather than they imported from United States. Resolve apparent inconsistency of these 2 statements.
3) Write the comparisons between the Bretton Woods system of exchange rates with that of gold standard. What results in the collapse of gold standard? What caused the demise of Bretton Woods system?
4) Explain what is meant by the term ‘managed float’. Whether the managed float systems precede or follow the adjustable-peg system? Describe.
5) Explain the causes of large U.S. trade deficits since the year 1992? Explain the major benefits and costs that are associated with the trade deficits? Explain: ‘A trade deficit means that the nation is receiving more goods and services from the abroad than it is sending abroad.’ How can that are termed as “unfavorable”?
6) Assume the Winter Sports—a French retailer of snowboards—wishes to order the 5,000 snowboards formed within the United States. The price per board is $200, the current exchange rate is 1 euro = 1 dollar, and payment is due in dollars when boards are delivered in 3 months. Use the numerical example for explaining why the exchange rate risk might form the French retailer hesitant to keep the order. How might the speculators absorb some of the Winter Sports’ risk?