Answer all the questions. The questions are complete

1 Complete each of the following statements with the appropriate phrase or word(s).

(i) The index of a country's export prices relative to the index of its import prices is known as

the ______________.

(ii) The theory that inflation rate differences between countries are the main reason for

exchange rate movements between their currencies is known as the ______________

theory.

(iii) The initial deterioration and later improvement in a country's account following a

devaluation is known as the ________________ effect.

If the US Federal Reserve Bank wished to raise the exchange rate of the dollar against other

currencies, then appropriate measures would include:

I selling dollars and buying yen on the foreign exchange market.

II recommending reduced tariffs on imported products.

III raising interest rates through its open market operations in the money market.

A I and II

B II and III

C I only

D III only

Which of the following is TRUE?

A There is no automatic way of solving a balance of payments deficit in a floating exchange

rate system.

B Under a fixed exchange rate system, speculators have no role in the determination of the

exchange rate.

C Under a floating exchange rate system the government needs to hold substantial reserves

of gold and foreign currency.

D Under a fixed exchange rate system, the government might have to introduce policies to

solve balance of payments problems that will be economically inefficient.

21.4 Suppose that the current exchange rate is $1.20 = 1. Suppose that over the next five years, UK

prices increase by 20%, whereas US prices increase by 10%. According to the purchasing power

parity theory, the exchange rate in five years' time should be:

A $1.00 = 1.00

B $1.10 = 1.00

C $1.20 = 1.00

D $1.32 = 1.00

ion 9.2 The joint p.d.f. of T(x) and T(y) is given by francy(s, t) = ( - 1)(n - 2) 0 2. (1 + s + t) " Find: a. The joint d.f. of T(x) and T(y). b. The p.d.f., d.f., and p(x + s) for the marginal distribution of T(x). Note the symmetry in s and t which implies that T(x) and T(y) are identically distributed. c. The covariance and correlation coefficient of T(x) and T(y), given that n > 4. Display the joint survival function of [T(x), T(y)] where the distribution is defined in Exercise 9.1. The future lifetime random variables T(x) and T(y) are independent and iden tically distributed with p.d.f. f(t ) = n - 2 (1 + t ) "-1 n >3, 12 0. Determine the joint d.f. and the joint survival function.In terms of the single life probabilities up; and \"p3,, express a. The probability that (any) will survive it years b. The probability that exactly one of the lives [it] and {y} will survive it years c. The probability that at least one of the lives (I) and (y) will survive a years d. The probability that {xy} Will fail within 11 years e. The probability that at least one of the lives wil'z die within 11 years f. The probability that both lives will die within 11 years. Show that the probability that [x] survives it years and (y) survivES n 1 years may be expressed either as upmy-l Pym] 01' HS pr ulpr-I- hy' Evaluate J'U 1pm l-L'rx'it} di- Using the distribution of x} and T{y) shown in Exercise 9.1 display (a) the d.f., [b] the survival function, and (c) E[T(xy)] for T(:cy}. Assume n 2?:- 3. Use (9.3.8) to obtain the p.d.f. of T{xy) for the joint distribution of T{x] and y) given in Example 9.2.3. in 9.4 Show tp = :pxy + :91: (1 _ rpy] + any [I T tpx] algebraically and by general reasoning- Find the probability that at least one of two lives (x) and (y) will die in the year (:4 + 1). Is this the same as IIlse3,? Explain. The random variables HI) and y) have the joint p.d.f. displayed in Exercise 9.1. Find (a) the it and the p.d.f. of TIRE), (b) E[T(@] for n 3:- 3, and {c} emit)- : 9.5 Given that ZSpEU = D2 and 151.31.; = 0.9, calculate the probability that a person age 40 will survive to age F5