Russia’s Ruble Hits a 17-Month Low

EconEye Admin

3 years ago

The Russian currency, the ruble, has lost nearly 40% of its value this year, further weakened by the drop in exports, combined with a jump in imports driven by strong domestic demand. Maxim Oreshkin, an economic adviser to Russian President Putin, blamed the central bank for the currency’s depreciation.—cnn.com

Answer the following questions to check your understanding of the story.

What is the effect of a decrease in Russian exports and an increase in Russian imports in the foreign exchange market?

A decrease in Russian exports ____________, and an increase in Russian imports ____________.

a) increases the supply of rubles; decreases the demand for rubles

b) decreases the demand for rubles; decreases the demand for rubles further

c) increases the supply of rubles; increases the supply of rubles further

d) decreases the demand for rubles; increases the supply of rubles

Wrong! - How does the rest of the world pay for Russian exports? How do Russians pay for imports?

Good Job! - When the rest of the world buys fewer Russian exports, the demand for rubles to pay for Russian exports decreases. When Russians buy more imports, the supply of rubles increases as Russians buy more foreign currency to pay for the imported goods and services.

The graph shows Russia’s interest rate. What does Maxim Oreshkin mean about the actions of the central bank contributing toward the ruble’s depreciation?

Maxim Oreshkin means that the Russian central bank has ______________ to prevent the ruble from falling.

a) lowered the interest rate by too little and too late

b) raised the interest rate by too little and too late

c) raised the interest rate by too much

d) not lowered the interest rate by enough

Wrong! - What is the effect of the Russian central bank changing the interest rate on the ruble’s foreign exchange rate?

That's Right! - The Russian central bank has raised the interest rate by too little and too late so that the Russian interest rate differential doesn’t encourage foreigners to increase purchases of Russian assets or Russians to keep more of their funds in Russian assets. The outcome is a fall in the ruble’s foreign exchange rate.

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