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- Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy. Living In an especially large country Having a domestic investment rate much higher than the domestic savings rate Having many other large economies geographically nearby Having an especially large budget deficit Having countries with a tradition of strong protectionist legislation shutting out importsYou have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. What is the effect on the foreign exchangemarket (the $ market)? 12. What impact will this have on imports?A. increaseB. decreaseC. remains unchanged 13. What impact does the change in the exchangerate have on aggregate demand?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged 14. What happens to the aggregate supply curve?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged12.When the Chips Are Down The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalue. In July 2010, the price of a Big Mac was $3.73 in New York, 13.2 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchanges rates were 6.78 yuan per U.S. dollar and 1.05 Swiss francs per U.S. dollar. a. Was the yuan undervalued or overvalued relative to purchasing power parity? b. Was the Swiss franc undervalued or overvalued relative to purchasing power parity c. Do you think the price of a Big Mac in different countries provides a valid test of purchasing power parity? 13.The price level in the Eurozone is 112.4, the prize level in the United States in 109.1 and the nominal exchange rate was 80 euro cents per U.S dollar. what was the real exchange rate expressed as Eurozone real GDP per unit of U.S. read GDP? 14.The Canadian price level is 106.3 the Japanese price level is 95.4 and the real exchange rate is 103.6…
- n chapter 11, "International Economics," of Naked Economics, Charles Wheelan discusses international exchange rates, how these are determined, and how exchange rates impact the economy. Of the statements below, Wheelan includes all of them in his discussion of the value of the British pound (the Briish currency) in 1992, EXCEPT for this one. Which of the below statements does the NE chapter on "International Economics" NOT include? (What does this chapter NOT say?) Group of answer choices The international exchange rate for the British pound (or any other currency) in the international exchange rates market is determined by demand for that currency relative to its supply. By increasing real interest rates to prop up the British pounds the British government would also be boosting the British economy which was in a state of economic recession at that time. To prop up (increase) the exchange rate for the British pound the British government could use monetary policy and increase…6. In the exchange rate model in Example 7.2, supposethe company continues to manufacture its product inthe United States, but now it sells its product in theUnited States, the United Kingdom, and possibly othercountries. The company can independently set its pricein each country where it sells. For example, the pricecould be $150 in the United States and £110 in theUnited Kingdom. You can assume that the demandfunction in each country is of the constant elasticityform, each with its own parameters. The question iswhether the company can use Solver independently ineach country to find the optimal price in this country.(You should be able to answer this question withoutactually running any Solver model(s), but you mightwant to experiment, just to verify your reasoning.)You are considering buying a bottle of wine. Supposethat the euro appreciates by 15% with respect to theU.S. dollar. Are you more or less likely to buy a bottleof Californian wine or French wine?
- 1. Illustrate through a graph the following and explain each graph:A. Use the foreign exchange market (Philippine pesos in the vertical axis, quantity of US dollars in thehorizontal axis, demand curve and supply curve of US dollars) to show the effect of the following onthe equilibrium exchange rate (one graph each of i and ii and assume other factors constant): i.) increase in foreign interest ratesii.) increased preference for Philippine products by foreigners. B. Illustrate using the AD-AS model how an increase in the exchange rate or depreciation of the peso willaffect real GDP and price level in the domestic economy (other factors constant).C. Use the loanable funds market and illustrate graphically how an increase in net capital outflow willaffect domestic interest rates and investment. Briefly explain your illustration.Suppose that the government of China is currently fixing the exchange rate between the U.S. dollar and the Chinese yuan at a rate of $1 = 6 yuan. Also suppose that at this exchange rate, the people who want to convert dollars to yuan are asking to convert $10 billion per day of dollars into yuan, while the people who are wanting to convert yuan into dollars are asking to convert 36 billion yuan into dollars. What will happen to the size of China’s official reserves of dollars? a. Increase. b. Decrease. c. Stay the same.If a country’s currency is expected to appreciatein value, what would you think will be the impact ofexpected exchange rates on yields (e.g., the interest ratepaid on government bonds) in that country? Hint: Thinkabout how expected exchange rate changes and interestrates affect a currency's demand and supply
- What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods of another country.(b) The rate at which one country’s goods trade for those of another country.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country.Q.1.12 As a result of more Americans visiting South Africa, we can expect, ceteris paribus:(a) an appreciation of the rand relative to the dollar.(b) a depreciation of the rand relative to the dollar.(c) an appreciation of the dollar relative to the rand.(d) that it will cost South Africans more to visit the United States.Q.1.13 What is a tariff? (a) A form of subsidy.(b) A tax on imported goods.(c) A tax on foreign property.(d) A form of quota.Q.1.14 In the Keynesian model, what is the most important determinant of a household’s consumption?(a) Disposable income.(b) Total wealth.(c) The number of persons in the household.(d) Its’ net…You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible What is the effect on the foreign exchangemarket (the $ market)? 8. The exchange rate (the amount of foreigncurrency that a $ buys)?A. increaseB. decreaseC. remains unchanged 9. The U.S. dollar has?A. depreciatedB. appreciatedC. remained unchanged 10. The currency in the other country has?A. depreciatedB. appreciatedC. remained unchanged