Use the information in the table below to calculate the change in the long-run Arakko ignis / Krakoan xcoin exchange rate (Ei/x). Specifically, does the Arakko ignis appreciate or depreciate, and by what percentage? Country - Change in Money Supply (µ) - Growth rate (g) Arakko 30% –4% Krakoa 10% 6%
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Use the information in the table below to calculate the change in the long-run Arakko ignis / Krakoan xcoin exchange rate (Ei/x). Specifically, does the Arakko ignis appreciate or
Country - Change in Money Supply (µ) - Growth rate (g)
Arakko 30% –4%
Krakoa 10% 6%
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- Explain how permanent shifts in national real money demand functions affect real and nominal exchange rates in the long run.Using the short-run model of FX, carefully explain the link between the budgetary crisis in Venezuela, driven by the decline in oil prices and the depreciation in the Venezuelan exchange rate. (Diagram required).Suppose that Bank Negara Malaysia (BNM) chooses to increase the money supply by 10%. This is accomplished through a RM30B purchase of government securities (Sukuk). Assuming that the monetary approach to exchange rates is the correct approach and that commodity prices are fully flexible (able to adjust to new information). Required : Explain the impact of the policy on : � The interest rate � The price level � The nominal exchange rate � The real exchange rate
- Consider a fall in the money supply and the impact that this will have on equilibrium in the goods market via both transmission mechanisms. Which of the following would lead to the biggest change in national income following this fall in the money supply? (a) An investment demand curve that is unresponsive to interest rate changes and an elastic liquidity preference curve. (b) An elastic investment demand curve and a high level of responsiveness from export and import demand following a change in the exchange rate. (c) A lack of responsiveness of the exchange rate to interest rate changes and an endogenous money supply. (d) A low level of responsiveness from export and import demand to a change in interest rates and an exogenous money supply curve.If the domestic currency depreciates,using a graph of aggregate demand and supply EXPLAIN how lags in this policy process can result in undesirable fluctuations in output and inflation.The economy of Zarland is operating below the full-employment level of output with a balanced budget. answer only 2 and 3 As a result of the interest rate change associated with the expansionary monetary policy, will the supply of Zarland’s currency in the foreign exchange market increase, decrease, or remain the same in the short run? Explain. Based on your answer in part (1), will the value of Zarland’s currency in the foreign exchange market increase, decrease, or remain the same in the short run? Following the change in the value of Zarland’s currency that you identified in part (2), will Zarland’s exports increase, decrease, or remain the same in the short run? Explain.
- If M stands for money supply, R for interest rate, E number of units of domestic currency per unit of foreign currency, Ee expected future value of E, a permanent increase in the money supply leads to the following sequence in the short run: A) M up, R up, Ee down, E up (domestic currency depreciates). B) M up, R up, Ee down, E down (domestic currency appreciates). C) M up, R up, Ee up, E up (domestic currency depreciates D) M up, R down, Ee up, E up (domestic currency depreciates) E) M up, R down, E up (domestic currency depreciates)Suppose the Federal Reserve wants to fix the U.S. exchange rate with the yen at $0.008 per yen. If the equilibrium market exchange rate were significantly lower at $0.007 per yen, what would the Fed need to do to maintain the fixed rate of $0.008 per yen? What would be the effect of these actions on the money supply in the U.S.? Explain.If the Japanese Yen appreciates relative to the U.S dollar, how will this impact U.S imports, exports, net exports, aggregate demand, the price level and the level of real GDP in the U.S? Will depreciation in the value of the US dollar relative to the Japanese Yen have any impact on SRAS? Explain your answer carefully.
- The U.S. economy is faltering, so the value of its associated currency, the dollar, is likely toWhich of the following is likely to occur for the United States, if the US dollar loses strength relative to the Japanese yen, ceteris paribus? A- Aggregate demand will decrease (shift left) B- Aggregate demand will increase (shift right) C- Aggregate supply will increase (shift right) D- Aggregate supply will decrease (shift left)The U.S. dollar is still considered the most traded and the most stable currency in the world. It is easily converted over to other currencies when trading and is also the official currency of several U.S. territories. However, a strong U.S. dollar has both advantages and disadvantages. One of the advantages that was already mentioned is that the conversion of the U.S. dollar over to other countries is fairly easy and grants it a greater degree of buying power for foreign products. This also makes foreign imports cheaper not to mention investors benefit when engaging in FDI. The disadvantages of a strong U.S. dollar is that it makes it more expensive for foreign countries to import products from the U.S., which negatively affects industries and business owners within that country as a result. It can even negatively affect the U.S. because those that conduct business internationally will technically earn less from foreign sales if their currency is not fully convertible. Overall, even…