EBK BRIEF PRINCIPLES OF MACROECONOMICS
7th Edition
ISBN: 9780100469884
Author: Mankiw
Publisher: YUZU
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Chapter 13, Problem 5QR
To determine
Impact of printing new currency in exchange rate.
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If the Fed started printing large quantities ofU.S. dollars, what would happen to the numberof Japanese yen a dollar could buy? Why
How would each of these events affect the supply or demand for Japanese yen?
A) Stronger U.S. economic growth.
B) A decline in Japanese interest rates.
C) Higher inflation in the United States.
In Belarus, the government doesn’t allow trading of its ruble outside a narrow price range, which greatly overvalues the ruble – there is a price floor on the ruble compared to euros or dollars. Because of the floor, currency trading has dried up – who would want to sell foreign currencies for grossly overpriced Belarusian rubles? A friend of one of my students has a web site designed to overcome rigidities in this market, a sort of Craigslist for currency. People specify amounts they are willing to buy or sell, agree to trade at some price and arrange a meeting place. When they meet, the trade nominally occurs at the official price floor, making the transaction nominally legal; but the person selling rubles makes extra payments to the buyer to lower the price sufficiently so that the trade actually takes place at the equilibrium price. This is one more way in which technology helps markets circumvent imperfections and rigidities.
Q: If the Belarusian government increases…
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EBK BRIEF PRINCIPLES OF MACROECONOMICS
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