Determine how the following events Will currency (such as the Philippine peso) in relation to a foreign currency (such as the US dollar) Appreciation of the domestic currency Tastes of domestic and foreign consumers favor a O country's products Price level increases more rapidly in this country O Domestic interest rates is now higher than foreign interest rates O Depreciation of the domestic currency о O O

Determine how the following events Will currency (such as the Philippine peso) in relation to a foreign currency (such as the US dollar) Appreciation of the domestic currency Tastes of domestic and foreign consumers favor a O country's products Price level increases more rapidly in this country O Domestic interest rates is now higher than foreign interest rates O Depreciation of the domestic currency о O O

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 3P

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Price level increasing, causing a movement along the aggregate demand curve, can be explained by: the real value of savings increases. an increase in investment and consumption expenditure. a decrease in interest rates. a decrease in net exports. *Answ: a decrease in net exports. Reason: (As a result of the foreign-purchases effect, an increase in the price level causes the quantity of exports to decrease and the quantity of imports to increases, which means net exports decreases and the aggregate quantity of real GDP demanded decreases.) Explanin in detailstep by step using exaple and graph
What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country. Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources other than income.(c) The maximum level of consumption that is financed from sources other than income.(d) shown by the slope of the consumption function. In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier. A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the…
The exchange rate is the price of one currency in terms of another currency. An exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table forecasts exchange rate data for May 21, 2018, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Foreign Currency Cost of One Unit of Foreign Currency (Dollars) Lithuanian litas (LTL) 0.3666 Canadian dollar (CAD) 0.8493 Euro (EUR) 1.3288 Mexican peso (MXN) 0.0889 United Kingdom pound (GBP) 1.8965 Suppose that on May 21, 2018, an ornamental bookcase handmade in the United Kingdom is priced at GBP 530. The approximate U.S. dollar price of the bookcase would be . If the exchange rate for the U.S. dollar–U.K. pound rises from $1.8965 to $2.2758 per U.K. pound, the U.S. dollar in value, or , relative to the U.K. pound.
PQ 8 The simple Marshall-Lerner condition would suggest that one of the following cases would produce a worsening of the trade balance if the country's currency depreciated. Which one? (The negative sign on elasticities is being ignoredf; also, assume that trade is initailly balanced) a. elasicity of demand for exports = .8; elasticity of demand for imports = .5 b. elasicity of demand for exports = .4; elasticity of demand for imports = .6 c. demand curve for exports is verttical; demand curve for imports is horizontal d. elasticity of demand for exports = .8; elasticity of demand for imports = .1
Japan and the United States are major trading partners and the exchange rate between the Japanese yen and the United States dollar is determined in a flexible foreign exchange market. (a) Assume real income increased in the United States. Explain how this increase in income in American GDP will affect the FOREX graph of the Yen b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United States real income? (i) Japan’s net exports. Explain. (ii) Unemployment in Japan. Explain. (iii) Japan’s long-run aggregate supply (c) Assume instead household savings increased in the United States. What would happen on loanable funds market in the United States with the supply of loanable funds, and show the effect of the increase in household savings on the equilibrium real interest rate. (d) Based on the change in the equilibrium real interest rate identified in part (c), what will happen to financial capital flows to the United States? e) Based on…
Consider a small country that is closed to trade, so its net exports are equal to zero. The following equations describe the economy of this country in billions of dollars, where C is consumption, DI is disposable income, I is investment, and G is government purchases: C� = = 30+0.8×DI30+0.8×DI G� = = 5050 I� = = 6060 Initially, this economy had a lump sum tax. Suppose net taxes were $50 billion, so that disposable income was equal to Y – 50, where Y is real GDP. In this case, this economy's aggregate output demanded was ___________ . Suppose the government decides to increase spending by $10 billion without raising taxes. Because the spending multiplier is ____________ , this will increase the economy's aggregate output demanded by ____________ . Now suppose that the government switches to a proportional tax on income of 10%. Because consumers retain the remaining 90% of their income, disposable income is now equal to 0.90Y. In this case, the economy's aggregate output…
Colombia is the world’s biggest producer of roses. The global demand for rosesincreases and at the same time Colombia’s central bank increases the interest rate.In the foreign exchange market for Colombian pesos, what happens to: v.) The quantity of pesos demanded?iv. The quantity of pesos supplied?
You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. What is the effect on the foreign exchangemarket (the $ market)? 12. What impact will this have on imports?A. increaseB. decreaseC. remains unchanged 13. What impact does the change in the exchangerate have on aggregate demand?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged 14. What happens to the aggregate supply curve?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged
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"In an economy with a high dependency on imported oil, what is the likely macroeconomic impact of a sustained and significant increase in global oil prices? A) An immediate improvement in the trade balance due to Increased export revenues. B) A decrease in inflation as higher oil prices lead to reduced consumer spending. C) An increase in the general price level and potential deterioration of the trade balance. D) Stabilization of the currency value due to increased demand for domestic currency to purchase oil.