Week 2 Assignment - Homework Chapters 2 and 3

This week's homework relates to Chapter 2, "International Flow of Funds" and Chapter 3, "International Financial Markets."

Please respond to the following:

1. Inflation Effect on Trade
   • How would a relatively high home inflation rate affect the home country's current account other things being equal?
   • Is a negative current account harmful to a country? Discuss.
2. Government Restrictions
   • How can government restrictions affect international payments among countries?
3. Stetson Bank quotes a bid rate of $.784 for the Australian dollar and an ask rate of $.80. What is the bid or ask percentage spread?
4. Fullerton Bank quotes an ask rate of $.190 for the Peruvian currency (new sol) and a bid rate of $.188. Determine the bid or ask percentage spread?11