Suppose Canada in 2018 has GDP per capita that is 80% of that in the U.S. Assume that GDP per capita in the U.S. grows at 2% per year forever, and in Canada it grows at 3% per year forever. In what year will Canada have the same GDP per capita as the U.S.? (Hint: ln(1.25) ≈ 0.22, ln(1.03) ≈ 0.03, and ln(1.02) ≈ 0.02)
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Suppose Canada in 2018 has
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- A U.S. company can borrow 10,000 pounds in Great Britain for 6% interest, paying back 10,600 pounds in one year. Alternatively, the U.S. company can borrow an equivalent amount of U.S dollars in the United States and pay 13% interest. Assuming capital markets are efficient, estimate the expected inflation rate in the United States if inflation in Great Britain is expected to be zero.Suppose a basket of goods in Paris costs €134 and the same basket purchased in New York costs $151. a. At what exchange rate between euros and dollars is the cost of the basket the same in each city? b. Now suppose that over the next year inflation in France is expected to be 3% while in the U.S. the forecast is for 7% inflation. What exchange rate do you expect a year from now?Suppose one British pound can purchase 1.32 U.S. dollars today in the foreign exchange market, and currency forecasters predict that the U.S. dollar will appreciate by 22.0% against the U.S. dollar over the next 30 days. How many dollars will a pound buy in 30 days?
- Assume the Central Intelligence Agency's World Fact Book reported that Afghanistan had a GDP of $78.557 billion with a projected growth rate of 2.8%. Assume that the growth rate continues for 5 years, 10 years, and 20 years. Calculate the GDP for Afghanistan for each of these time periods.A developing country has determined that each additional $1 billion of investment in capital goods adds 0.3 percentage point to its long-run average annual rate of growth of per capita real GDP. Domestic entrepreneurs recently began to seek official approval to open a range of businesses employing capital resources valued at $27 billion. If the entrepreneurs undertake these investments, and assuming that other things are equal, calculate the nation's long-run average annual rate of growth of per capita real GDP up to a fraction of a percentage point. nothing percent. (Round your answer to one decimal place.)Assume that relative Purchasing Power Parity holds. Also assume that the inflation rate over the coming year is expected to be 6% in the U.S. and 2% in Norway and that the current spot rate of the Norwegian krone (NOK) is $0.11. If your company plans to import 10 million NOK of product from Norway over the coming year, how many U.S. dollars will it need to pay if it plans to convert USD to NOK one year from now?
- Suppose that a country has a trade surplus of $50 billion, a balance on the capital account of $10 billion, and a balance on the current account of −$200 billion. The balance on the capital and financial account will be: a. $10 billion. b. $50 billion. c. $200 billion. d. −$200 billion.If the multiplier in an economy is 3, a $30 billion increase in net exports will Multiple Choice increase GDP by $90 billion. reduce GDP by $10 billion. decrease GDP by $90 billion. increase GDP by $30 billion.After a few years, Home’s net foreign asset position is -400. For simplicity, assume GDP is 1000 every year afterward, and the interest rate on international borrowing is kept at zero from now on. Suppose Home wants to maintain a current account surplus at 2% of GDP and gradually pay back the debt. How many years will it take for Home to pay back the debt fully? (Note that in 2014, U.S. net foreign asset position is about -40% of GDP as assumed here)
- If the international fisher effect holds, and if the following information is given, what should be S(RUB/THB)? The expected inflation in Thailand is 5% The expected inflation in Russia is 12% F(THB/RUB) is 1.10 THB is Thai Baht and RUB is Russian RubleSuppose it takes 1.3037 U.S. dollars today to purchase one British pound in the foreign exchange market, and currency forecasters predict that the U.S. dollar will depreciate by 15% against the pound over the next 30 days. How many dollars will a pound buy in 30 days?(a) Suppose that the current exchange rate between the U.S. dollar ($) and the pound sterling (£) is Se/$=0.75 (i.e. $1 = £0.75). The basket of goods and services consumed by a typical household cost £200 in the UK and $300 in the U.S. A one-year U.S. Treasury bill yields an annual rate of retum of 3%, while a comparable UK Treasury bill yields 5%. The Federal Reserve is expected to keep the U.S. inflation rate at 2% over the coming year, while the Bank of England is expected to keep the UK inflation rate at 3% over the same period. (1) Is the pound overvalued or undervalued relative to the dollar by the standard of absolute purchasing power parity?