Using the fundamental equation of the asset approach to exchange rates for two countries,Home and Foreign, show graphically the effect on expected rate of return on Home and Foreigndeposits and on the spot exchange rate in the following cases:a. The expected exchange rate E H/F, increases, but interest rates in both countries remainunchanged.b. The interest rate on Home and Foreign deposits increases by the same amount and theexpected exchange rate remains unchanged.

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Answered: Using the fundamental equation of the…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter7: Nonlinear Optimization Models

Section: Chapter Questions

Problem 69P

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Assume that Trinbago is a small country that produces wine and motor vehicles, where motor vehicles are capital intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin assumptions hold. The other country in the model is Vincyland. 1. Given that Vincyland is a small country, examine the partial equilibrium welfare effectsassociated with imposing a tariff on their import good given that the prediction of theimported good yields a positive externality.
OUTPUT AND PRICES IN QUEENTUCKY, ARIZONA This Year’s Output This Year’s Price 800 pairs of Converse $10 per pair 2,000 gallons of Dr. Pepper $2 per gallon 200 pairs of Vans $15 per pair 5,000 lbs. of wheat $5 per pound Queentucky produces 4 final goods: Converse, Dr. Pepper, Vans and wheat. (b) Assume that in Queentucky the GDP deflator/CPI index is 100 in the base year and 125 this year. Calculate the following: (i.) The inflation rate, expressed as a percentage, between the base year and this year. 40% (ii.) This year’s real GDP 32,000 (c) A worker is negotiating a raise with her employer. Based on the inflation rate you calculated in (b)(i), if the employee is given a cost-of-living-adjustment (COLA) of 10% to her salary, what will happen to her real wage? Explain. Answer question C?
Assume that Trinbago is a small country that produces wine and motor vehicles, where motorvehicles are capital intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin(H-O) assumptions hold. The other country in the model is Vincyland Given that Vincyland is a small country, examine the partial equilibrium welfare effectsassociated with imposing a tariff on their import good given that the prediction of theimported good yields a positive externality.Should a subsidy have given a moredesirable solution.
Fred has been told that diversifying his investments will significantly reduce risk. He hastherefore invested in two stocks. His portfolio consists of a $1 500 000 investment in DrugsLimited and $750 000 invested in shares of Pharmaceuticals Limited.Economy Probability ReturnsDrugs Limited PharmaceuticalsLimitedBoom 0.4 12% 19%Normal 0.5 8% 11%Recession 0.1 2% -4% i. What is the expected return on Fred’s portfolio? ii. Advise Huron as to the effectiveness of his diversification strategy.
Undertake a model analysis using the IS-LM model. Using the IS-LM model(WITHOUT BALANCE OF PAYMENTS), illustrate and discuss the impact of the Asian Financial Crisis on interest rates and economic activity (and thus the unemployment rate). Remember to explain any changes you have made to the curves and/or any shift
It is often difficult to estimate the expected future dividend growth rate for use in estimating the cost of existing equity using the DCF or DG approach. In general, there are three available methods to generate such an estimate: • Carry forward a historical realized growth rate, and apply it to the future. • Locate and apply an expected future growth rate prepared and published by security analysts. • Use the retention growth model. Suppose Johnson is currently distributing 45% of its earnings in the form of cash dividends. It has also historically generated an average return on equity (ROE) of 20%. Johnson’s estimated growth rate is %.
A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. A)True B)Flase
Brandon is considering expansion of a store. If he expands, the interest rate at which he borrows the money is the important factor. He is not sure what kind of interest rate will be obtained. If he does not expand, the only factor influencing the outcome is future economy. The following table summarizes the situation: Probabilities Payoff Expand Large Favorable interest .3 $60k Neutral interest .5 $30k Unfavorable interest .2 ‑$70k Expand Small Favorable interest .3 $50k Neutral interest .5 $30k Unfavorable interest .2 ‑$30k Do not expand…
6) Some people have said that the Soviet Union saved too much. Explain the benefit of saving in the long run and how over-saving could be possible. 7) Give an example of a government policy that could change savings behavior and an example that could change the productivity in an economy. 8) Explain why the Federal Reserve’s goals of lowering inflation and unemployment creates a time consistency problem. Explain using the short and medium run Phillip’s curve. 9) Show a liquidity trap situation on an IS-LM graph. Explain the possible policy changes to end this situation. ************* SHOW WITH GRAPHS PLEASE*********************
A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. True or False?
A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. A)True B)False
A rice importer has three sources: Thailand, Vietnam, and China. Unfortunately, the annual amount of rice harvested is heavily dependent upon the amount of rainfall during the growing season. The tables below show probabilities and prices for wet, dry, and normal growing seasons. Rice is sold in tons. PROBABILITIES Wet Dry Normal Thailand 0.5 0.2 0.3 Vietnam 0.6 0.3 0.1 China 0.4 0.4 0.2 Price per Pound ($) Wet Dry Normal Thailand 0.95 1.10 1.00 Vietnam 0.85 1.20 0.98 China 0.90 1.15 1.05 This is a maximization problem. True or Flase?

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