Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 4QAP
To determine
The graphical representation of given situations.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The autonomous region of Catalonia has recently declared independence from Spain, and is looking for an exchange rate policy that would best fit their needs. The Catalans’ main goal is to stabilise the price level in the long-run, but constantly experience fluctuations in the price of foreign goods imported from Spain and other European countries. Would it be better for the Catalans to fix the exchange rate against the Euro, or to adopt a floating exchange rate? Justify your answer briefly.
Let S be the USD/GBP exchange rate, P∗ be the pound cost of a consumption basket in the U.K., and P be the dollar cost of a consumption basket in the U.S. Using the units of S, P∗, and P, find the units of the real exchange rate, Q = SP∗/P
Suppose that Russia decided to increase interest rates by %2.
Considering the inflation and interest differential between the US and Russia, what is likely to happen to real exchange rate in Russia?
Chapter 18 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
Knowledge Booster
Similar questions
- Q)1 Please use the analytical techniques we developed in class to explain how an increase in the Oman government budget deficit will affect the real exchange rate. Be sure to include (A)a graph of the market for loanable funds in Oman, (B) a graph that shows the amount of net capital outflow as a function of the interest rate, and (C) a graph representing the market for foreign currency exchange. Provide a brief written description in addition to the graphs. Q2) From the following table, calculate GDP, GNP, Net national product, National income, Personal income and Disposable personal income In millions of dollarsarrow_forwardSuppose that the exchange rate between Great British pound and U.S. dollar is 0.78 pounds/dollar. The price index in the United States is 264 and the price index in Britain is 277. If the exchange rate and British price index both doubled, what would happen to the real exchange rate?arrow_forwardIn a large open economy, the IS curve has been given by Sd(r)-Id(r)=NX(e), where e is the real exchange rate that is positively related to the real interest rate r. Can you illustrate why the IS curve is downward sloping? That is, as Y increases, the real interest rate r is lower in equilibrium.arrow_forward
- Explain how the flexible exchange rate may be use to correct disequilibrium within an economy.arrow_forwardSuppose that Country A developing country and Country B is a developed country. Country A Policy Interest Rate: 19% Country A Inflation Rate: %16 Country B Policy Interest Rate: %0.25 Country B Inflation Rate: %2 Considering the inflation and interest differential between the Country A and Country B, what is likely to happen to real exchange rate in Country A? Calculate and show answer.arrow_forwardWhich factors are the main determinants of real exchange rate? Explain with details how changes in these factors affect the real exchange rate with reasoning.arrow_forward
- The exchange rate at the beginning of the year was SF1.0000/$. The price level of a typical consumption basket in Switzerland was SF120/SFCB and the price level of a typical consumption basket in the United States was also $100/$CB at the beginning of the year. Calculate the real exchange rate at the beginning of the year. SFCB0.6667/$CB SFCB0.8333/$CB SFCB1.0000/$CB SFCB1.3333/$CB SFCB1.6667/$CBarrow_forwardSuppose the domestic real money demand amount increases by 16%, the domestic nominal money supply increases by 30%, and the foreign nominal money supply increases by 8%, while the foreign real money demand amount remains constant. What should be the percent increase the exchange rate of domestic currency per foreign currency according to the monetary approach to the exchange rate?arrow_forwardSuppose that a country experiences inflation while the nominal exchange rate and the price level in its trading partner remain unchanged. What will happen to the country's real exchange rate and to net exports?arrow_forward
- Suppose you are a pension fund manager. Your fund holds bank deposits in Australia, Japan, the United States and other countries. News on the iron ore market causes you to raise your expected price of iron ore per tonne. Given that Australia is a major exporter of iron ore, what effect would you expect this to have on the exchange rate between the Australian dollar and the Japanese Yen. Illustrate your answer using an appropriate diagram.arrow_forwardWhenever the purchasing power of a Home country's currency is the same in both Home and Foreign, the real exchange rate between Home and Foreign is equal to 1. True False If inflation in the United States is 4% per year and in China it is 8% per year, and interest rate in the China is 10%, then the Fisher effect predicts that the interest rate in the United States is 6%. True False If relative PPP and uncovered interest parity hold,____________________ Absolute PPP must hold. covered interest rate parity must hold. real interest rate parity must hold. anything could happen.arrow_forwardMacroeconomics. Explain how the exchange rate adjusts to a temporary decrease in the foreign interest rate, R*, holding output constantarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning