Various Factors Affecting Exchange Rate of a Country

Question

In 500–750 words discuss the impact of at least two different macroeconomic factors can impact a currency’s exchange rate. How can the actions of a country’s government directly and indirectly impact the exchange rate?

Problem Sets

1.    The Bank of the Midlands’ bid price for Canadian dollars is $.7938 and its ask price is $.8100. What is the bid/ask percentage spread?
2.    British pound is $1.73. The expected spot rate one year from now is assumed to be $1.66. What percentage change does this reflect and has the British pound depreciated or appreciated against the U.S. Dollar?

Summary

The question belongs to Economics, particularly to Macroeconomics and it deals with how macroeconomic factors and the actions of the country’s government can have an impact on a country’s foreign exchange rate. These have been explained in detail in the solution along with the problems.

Total Word Count 571