3. Consider the economy with PH = 250 CH, PF = 5 CF and E = 20 CH/CF. 3.a. Answer the real exchange rate q. 3.b. According to q. which country's goods and services are more expensive: Home, Foreign, or Price levels are the same?
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- Suppose that the real exchange rate between Canada and Tanzania is defined in terms of baskets of goods. What will increase the real exchange rate (that is, increase the number of baskets of Tanzanian goods a basket of Canadian goods buys)? a. an increase in the number of Tanzanian shillings that can be purchased with a dollar for me b. an increase in the price in Canadian dollars of Tanzanian goods c. an increase in the price in Tanzanian shillings of Tanzanian goods d. a decrease in the number of Tanzanian shillings that can be purchased with a dollar7.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 goods7, If the interest rate is 8% in the US and 5% in Europe, then according to the interest rate parity theory, in the long run: (a) Will the dollar appreciate or depreciate with respect to the euro? (b) By what percent?
- b. 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).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”.True/False and Explain An increase in savings implies a decrease in consumption and therefore a decrease in GDP. The exchange rate between two countries can be thought of as unrelated to any economic variables. If the real rate of return on investment is higher in the US than in Canada, capital will tend to flow out of the US and into Canada. When nominal interest rates are zero, the central bank can still lower them by printing money and purchasing bonds from banks. This increases the supply of loanable funds and stimulates lending. A pro-savings policy by the US would likely reduce the US trade deficit. When savings equals investment, reducing savings and increasing consumption is especially effective in stimulating output. In the dynamic AS-AD model, a perfectly inelastic aggregate supply curve means the central bank cannot control the rate of output growth or the inflation rate. 8. There are an infinite number of combinations of real interest rates and inflation rates…
- 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 billionAssume the real exchange rate q between the UK pound and Swiss franc is 1.19. What does that mean for the British economy? The competitiveness of the British economy deteriorates. There is no connection between the real exchange rate and the competitiveness of the economy. The competitiveness of the British economy is unaltered. The competitiveness of the British economy improves. Clear my choice4) Suppose that the long term interest rate is decreasing since there is anexpectation that the economy is delving into the recession. How that changemight affect the foreign exchange rate in the country? Discuss? (Use graphs)
- True/False and Explain 1. An increase in savings implies a decrease in consumption and therefore a decrease in GDP. 2. The exchange rate between two countries can be thought of as unrelated to any economic variables. 3. If the real rate of return on investment is higher in the US than in Canada, capital will tend to flow out of the US and into Canada. 4. When nominal interest rates are zero, the central bank can still lower them by printing money and purchasing bonds from banks. This increases the supply of loanable funds and stimulates lending. 5. A pro-savings policy by the US would likely reduce the US trade deficit. 6. When savings equals investment, reducing savings and increasing consumption is especially effective in stimulating output. 7. In the dynamic AS-AD model, a perfectly inelastic aggregate supply curve means the central bank cannot control the rate of output growth or the inflation rate. 8. There are an infinite number of combinations of real interest rates and…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?Q2: The current exchange rate between Canadian dollar and British Pound is 1 Pound = 1.55 C$. If the C$ weakens by 1.25% relative to the British pound, how much will be C$ per British Pound? ___________.What is the percentage that British pound appreciates? ______________%. (Please pay attention to this %, if your answer is like 22.45%, you should input 22.45)