Answer Happy

3. Briefly assess the merits of each of the following statements. Provide a true/false/uncertain response with explanation. A clear justification for your position is required for full points. a. An increase in Swiss imports of goods and services will lead to an appreciation of the Swiss franc. b. In a floating exchange-rate system, government officials must intervene in the foreign exchange market to keep the exchange rate from fluctuating. c. Arbitrage ensures that the spot exchange rate value of a currency will equal the forward exchange rate value of the currency. d. If the domestic interest rate increases, while the foreign interest rate and the expected spot exchange rate remain constant, the return comparison shifts in favor of investments in bonds denominated in the foreign currency. e. If the government of the United Kingdom pegs the pound to the dollar, it will not necessarily have an impact on the value of the pound relative to the Japanese yen.