What are demand-related factors and supply-related factors, that may influence exchange rate movements? Include any possible government-related factors.

Q: trade plays an important role in the development of any economy. ii. If there is expansionary fiscal…

A: Economic growth  1) The economic growth refers to situation when there is a monetary increase in…

Q: Which factors are the main determinants of real exchange rate? Explain with details how changes in…

A: International terms of trade shocks, government expenditure patterns, trade restrictions, net…

Q: What is one of the ways governments can influence exchange rates?

A: the government uses the exchange rate tool to achieve multiple objectives such as full employments,…

Q: In the Mundell-Flemming model with floating exchange rates, explain what happens to aggregate…

A: Mundell-Flemming model is nothing but an extension of the IS-LM model which explains the working of…

Q: In the context of the monetary approach to the determination of the exchange rate, what is the…

A: As a particular product gets into manufacturing process, cost  takes place and business follow ups.…

Q: Explain the exchange rate overshooting with the help of the diagrams that you drew for part a. Why…

A: Exchange rate overshooting is more volatile in short run as there is an excessive movement in…

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: You read in the paper that the dollar has strengthened in value relative to the euro. How is this…

A: Value of a currency states the price or interest rate at which people from different countries are…

Q: Using examples, demonstrate how exchange rate forecasting is approached?

A: The exchange rate of a country is the price of one currency in terms of another. It is used when the…

Q: Explain with the aid of a model graph, describe the effect of changes in domestic and foreign…

A: With the increment in the rate of interest, there will be less demand for loans, and similarly, when…

Q: Define long exposure and explain the relationship between the variability of the domestic currency…

A: Please find the images attached for detailed explanation

Q: In the context of the monetary approach to the determination of the exchange rate, what is the…

A: Exchange rate - The exchange tells us about the worth of the currency of one country in comparison…

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: Does an expectation of a stronger exchange rate in the future affect the exchange rate in the…

A: The exchange rate refers to trading account that a country charges other country for the imports and…

Q: Why should Purchasing Power Parity hold in the long run? Also, why is it that Purchasing Power…

A: The purchasing power parity theory explains the exchange rate of two currencies that will be equal…

Q: Show using the Mundell-Fleming model how an increase in tariffs would affect the nominal exchange…

A: Mundell-Fleming model is the extension  of IS-LM model in the run, that is explained as follows.

Q: Explain with examples how to measure exchange rate risk for long positions and short positions

A: The impact of unanticipated exchange rate fluctuations on the firm's value is a standard definition…

Q: Is expansive monetary policy possible, if a country has a floating exchange rate

A: A floating exchange rate is when the value of a currency depends upon the demand and supply of the…

Q: In the Mundell-Flemming model with floating exchange rates, explain what happens to aggregate…

A: Answer: Introduction: Mundell-Flemming model explains open economy macroeconomic adjustments under…

Q: When is exchange-rate targeting likely to be a sensiblestrategy for industrialized countries? When…

A: Under the exchange rate targeting strategy, the central bank intervenes to maintain a particular…

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: Explain the exchange rate overshooting with the help of the diagrams. Why is the exchange rate…

A: he overshooting model explains that short run fluctuations are greater than the long run…

Q: Explain how nominal exchange rate affects real exchange rate.

A: The nominal exchange rate can be understood as that how much amount of foreign exchange can be…

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 the Mundell–Fleming model with floating exchange rates, explain what happens to aggregate income,…

A: Mundell Fleming model shows the short run relationship between a country’s interest rate, nominal…

Q: Give reasons, supported with clear explanations, why countries opt for a floating exchange rate?

A: The exchange rate is the rate at which domestic currency is exchanged with foreign currency in the…

Q: Under a floating exchange rate system, use the Mundell-Fleming model to predict with the aid of a…

A: The LM curve shows the direct relationship between interest rate and output. The LM curve is upward…

Q: How will you form exchange rate forecasts based on the covered interest parity and purchasing power…

A: A fundamental calculation is known as "interest rate parity" determines international currency…

Q: Explain how the exchange-rate transmission mechanism can strengthen the interest-rate transmission…

A: The Monetary Policy is defined as a policy which is used by the government to control a nations…

Q: If a country consistently runs net export surpluses, then what will happen to its exchange rate?

A: A trade surplus occurs when the result of the above calculation is positive. A trade surplus…

Q: What is the difference between transaction demand, speculative demand, and autonomous transactions…

A: Money demand is the preferred keeping of capital wealth in the context of cash: such that, instead…

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: How does a country’s decision to fix its exchange rate to that of another nationshape the conduct of…

A: The fixed exchange rate/pegged exchange rate is the regime in which the worth of the exchange rate…

Q: How can the Big Mac Index explain the ability of a country's exchange rate? And how does the Big Mac…

A: The measure that depicts the value of one currency being measured in terms of another currency is…

Q: Show graphically and explain how increasing import influence exchange rate

A: The equilibrium of trade influences cash trade rates through its effect on unfamiliar trade supply…

Q: Display graphically and explain an exchange rate overshooting

A: Exchange rate overshooting refers to the model in which foreign exchange rate overreact temporarily…