International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
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Explain why you agree or disagree with each of the following statements: a. “A nation’s currency will depreciate if its inflation rate is less than that of its trading partners.” b. “A nation whose interest rate falls more rapidly than that of other nations can expect the exchange value of its currency to depreciate.” c. “A nation that experiences higher growth rates in productivity than its trading partners can expect the exchange value of its currency to appreciate.”
Explain why you agree or disagree with the following statements:a. A country that grows faster than its major trading partners can expect the international value of its currency to depreciate.b. A nation whose interest rate is rising more rapidly than interest rates in other nations can expect the international value of its currency to appreciate.c. A country’s currency will appreciate if its inflation rate is less than that of the rest of the world.
It is often believed that the value of the currency of some countries are too low, which gives the firms in those countries an unfair competitive advantage. Econometric
evidence indicates that relative PPP does not hold in the short-run, while it does hold in the long-run.
a. What does this imply for countries with a fixed exchange rate that is 'unfairly low'?
b. Can a country maintain an 'unfair' competitive advantage in the long-run by somehow manipulating its exchange rate? Explain.
c. Assume the UK and the US are the only countries in the world. Explain what will happen in the long run to the pound and the nominal interest rate in the UK as
a result of a decrease in the expected inflation rate in the UK..
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- a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200 import good from Britain? d. How do these changes affect the economic welfare of U.S. exporters and U.S. importers? 2. a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.72 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200…arrow_forwardThe price of a laptop in Canada is C$1,000. The price of a car in Germany is 10 000 euros. The current exchange rate is 0.9 euros per Canadian dollar. If a laptop is exported from Canada to Germany with no barriers to trade, what will be the price of the laptop in Germany? If a car is imported to Canada from Germany with barriers to trade, what will be the price of the car in Canada? Suppose the Canadian dollar appreciates by 10 percent against the euro. What will be the price of a computer exported from Canada change in Germany? Suppose the Canadian dollar appreciates by 10 percent against the euro. What will be the price of a car imported to Canada from Germany change in Canada?arrow_forwardAssuming that the Euro-U.S. dollar exchange rate is .9. If a German buys an American automobile for $30,000, then what would the automobile cost in Euros? What would the automobile cost if the dollar depreciated by 20 percent?arrow_forward
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