In July 2018 Yi Gang, Governor of the People’s Bank ofChina, said the fluctuations in the foreign exchange market were mainly due to factors like stronger U.S. dollar andexternal uncertainties. How can fluctuations in currencyexchange rate affect your country’s economy?

Q: Refer to the following diagram to help you answer this question. Under fixed exchange rates, the…

A: Answer in step 2.

Q: A country with fixed exchange rate can always raise its policy interest rate to curb down…

A: Exchange rate:- Exchange rates between different currencies indicate how strong one currency is…

Q: What are five (5) factors that affect real exchange rate?

A: "The rate at which one country's currency can be exchanged into another," according to the…

Q: Using data from The Economist's Big Mac Index for 2011, the following table shows the local currency…

A: PPP theory states that exchange rate adjust to equate prices of goods in 2 countries. This means the…

Q: The figure above illustrates the U.S. foreign exchange market. Illustrate how the exchange rate…

A: In the international market, the exchange rate of a currency depends upon various factors such as…

Q: "In the Balance of Payments, if there are no "net errors and omissions," the difference between the…

A: Macroeconomics is a part of economics that deals with production, decision and allocation concerning…

Q: Distinguish between a nominal appreciation and a real appreciation of a currency.

A: In finance, the exchange rate is the price at which one currency is exchanged for another. National…

Q: In 2018, in the United States the sum of the balance of all three of the balance of payments…

A: In 2018, in the United States the sum of the balance of all three of the balance of payments…

Q: Explain what effect each of the following events will have on the IS curve in a flexible exchange…

A: The IS curve represents all the combinations of income level (Y) and interest rate (r) at which the…

Q: How do wars and pandemics affect a country's nominal exchange rate, interest rate, and production?

A: The nominal exchange rate basically determines that how much local money is required to acquire…

Q: Explain how the flexible exchange rate may be use to correct disequilibrium within an economy.

A: A flexible exchange rate system is a system in which the value of the exchange rate is determined by…

Q: In an economy with a flexible exchange rate, an expansion in the nominal stock of money leads to the…

A: In an economy with a flexible exchange rate, an increase in the money supply will have an effect on…

Q: Suppose that on January 1 2009,  the TL price of the dollar is 1.40 over    the year, inflation rate…

A: Purchasing power parity(PPP) hypothesis suggests that the exchange rate between two currencies is in…

Q: To keep the U.S. dollar from depreciating against the Japanese yen, the U.S. Federal Reserve must…

A: To keep the U.S. dollar from depreciating against the Japanese yen, the U.S. Federal Reserve must…

Q: What are the three categories of transactions in the balance of payments? Give an example of each.

A: The balance of payments is considered to be a systematic record of all the transactions of a country…

Q: Discuss, with providing examples, the relationship between the foreign exchange rates and Current…

A: Note: Since you have asked multiple questions, we will solve the first question for you. If you want…

Q: How can a surge in exports and decrease in imports cause an increase in aggregate demand and what…

A: Aggregate demand is defined as the total demand of all final commodities and services at a given…

Q: Suppose that, initially, the foreign exchange market between the United Kingdom and Canada is in…

A: Here, it is given that the exchange rate market between UK and Canada is in equilibrium.

Q: A country utilizes a fixed exchange rate. If the central bank were to increase the money supply,…

A: Under the fixed exchange rate system, the one currency is fixed against other currency. The value of…

Q: Using data from The Economist's Big Mac Index for 2019, the following table shows the local currency…

A: PPP theory states that the exchange rate adjusts to equate prices of goods in 2 countries. This…

Q: Can we directly extend the domestic CAPM to the international CAPM without considering the use of…

A: Answer The Capital plus valuation Model calculates the particular quantity of stocks and compares…

Q: In April 2002, the price of a Big Mac in the UK was £1.99. Using data from The Economist's Big Mac…

A: Developed in 1986 by The Economist magazine, the Big Mac index uses McDonald's Big Mac prices as a…

Q: If the central bank raises interest rates it will A) lower aggregate demand and raise the…

A: " Aggregate demand reflects the relationship between price level and total number of all the final…

Q: What, then, determines exchange rates in the short run?

A: The exchange rate is determined by the market forces of demand and supply. After a certain stage,…

Q: Empirical studies find that exchange rates are much more variable then   inflation differentials.…

A: The exchange rate refers to the relative value of a currency in terms of other foreign currencies.…

Q: Suppose country A’s goods become more popular with foreign consumers, and country B’s less so. How…

A: Economics as a subject deals with the allocation of scarce resources among humans with unlimited…

Q: What does it mean when the dollar appreciates compared to when the dollar depreciates?   Has the US…

A: Depreciation of money means the declining value of the currency in terms of the exchange rate.

Q: Explain why a country with fixed exchange rate and open financial markets has to give up its…

A: The theory that depicts that countries might tend to choose among options while making decisions…

Q: Suppose country A’s goods becomes more popular with foreign consumers, and country B’s less so. How…

A: Macroeconomics is a part of economics that deals with production, decision, and allocation…