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- 7.When comparing per capita income in different countries, is the currencies exchange rate a good measure? a.Yes because it is precise b.Yes because it represents the value of one good in a different currency c.No because it is subject to monetary shock d.No because it doesn’t account for the value of non-traded goodsD3) . If the actual exchange rate for the euro value of the British pound is less than the exchange rate that would satisfy absolute PPP, which of the currencies is overvalued and which is undervalued? Why?1. You have an avocado tree, which grows 400 avocados this year, 150 next year. Your neighbor has an avocado tree, which grows 0 avocados this year, 50 next year. The equilibrium exchange rate is “1 today = ? tomorrow”.
- Suppose that Thai consumers make several purchases of foreign-produced cosmetic products, ceteris paribus, and that this is the only transaction, answer the following sub-questions only in words.a) What happens in the FOREX market for Thai Baht (THB)?b) What happens to the value of the Thai Baht relative to other currencies in the FOREX market?c) What happens to the Thai net exports eventually?Define nominal exchange rate and real exchange rate. What are the two main types of exchange-rate systems? What explains the behavior of net exports represented by the J curve? How does real exchange rate affect net exports? Explain and give one example.Assume the real GDP of Brazil in 2020 was R 6 billion (Real). If the exchange rate was 1 Real = $0.25, calculate the real GDP of Brazil in US dollars in 2020. Group of answer choices $1.5 billion $24 billion $4 billion $2.4 billion
- For a given real exchange rate how are a country s For a given real exchange rate, how are a country’s net exports affected by an increase in domestic income? an increase in foreign income? How does an increase in the domestic real interest rate affect the real exchange rate and net exports? Explain. For a given real exchange rate how are a country sIf the foreign price level increases by 4%, and the domestic price level increases by 17%, by what percent should the exchange rate of domestic currency per foreign currency increase, given relative PPP holds? Your answer should be an integer with a % sign assumed to follow (e.g., if you wish to say 48 percent, write 48). The percent increase in the exchange rate should beb. Consider a fixed exchange rate regime. How does higher government expenditure affect output and interest rate in equilibrium? Discuss with the help of the diagram above (e.g., show what curves will shift, label curves and axes correctly).
- urgent Consider an OPEN ECONOMY with a floating exchange rate regime. In the aftermath of recent elections won by the country’s socialist party, consumer confidence and consumption has increased dramatically. Within the IS-MP framework for an open economy, explain and illustrate graphically what the effect is of the increase in overall consumption on equilibrium output, the real interest rate, net cash outflow, the trade balance and the country’s real exchange rate.Whether this is true, false or uncertain? Why? Use graphs if possible. The difference between the slopes of the IS and RX curves depends only on the sensitivity of net exports to the real exchange rate.A10 Suppose that P = 100, P* = 200, e = 0.75 where P is the domestic price level, P* is the foreign price level and e is the nominal exchange rate (i.e. number of domestic currency units required to buy 1 unit of foreign currency).a) Find the real exchange rate.b) If the domestic price level increases, what will be the effect on the real exchange rate, imports and exports?