Under a Flexible-Exchange-Rate System,an Increase in the Demand for Japanese

question 23

Multiple Choice

Under a flexible-exchange-rate system,an increase in the demand for Japanese yen would cause the Canadian dollar/Japanese yen exchange rate to

• A)fall.
• B)rise.
• C)remain unchanged because supply also increases.
• D)remain unchanged because the exchange rate is set by the Central Bank.

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Definitions:

Mail Float

The time difference between when a check is written and when it is actually cleared and funds are deducted from the payer's account.

Availability Float

The time difference between when a check is deposited in a bank account and when the funds are made available.

Miller-Orr Model

A financial model used to manage cash balances by setting upper and lower limits on cash reserves, triggering buying or selling of securities when these thresholds are crossed.

Safety Stock

Safety stock is additional inventory held by a business to prevent stockouts caused by variations in supply and demand.