MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 19, Problem 4TY
To determine
To show: The effect of speculator activity to limit price fluctuation using supply and
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The popularity of the leader of a nation can affect the value of their currency. If the President of the United States has a good popularity rating with the citizens of the United States, does that make the US dollar stronger or weaker? Why or why not?
The demand increase for foreign currency is caused by:
For each of the following, what is the effect on the supply of foreign currency. The demand for foreign currency, and the dollar price of foreign currency? Does the dollar rise or fall?
A recession in the U.S. lowering U.S. incomeAn economic boom increases income in ChinaU.S. interest rates decreaseInterest rates decrease in all major countriesInterest rates rise in Europe and Asia, but not in the U.S.
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- Provide two examples of how a company might engage in currency speculation.arrow_forwardwhy, according to some economists, should canada adopt the U.S dollar as its currency?arrow_forwardIn 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…arrow_forward
- Can the central bank influence the currency-deposit ratio? Explain.arrow_forwardWhy does the demand for foreign currency falls when its price risesarrow_forwardOver the past 20 years, Brazil has experienced relatively high inflation while Japan has experienced relatively low inflation. What do you think has happened to the number of Brazilian reais a person can buy with a Japanese yen?arrow_forward
- Q3-13 If a country adopts a currency board arrangement, a result is that the country's money supply _______ be increased by the purchase of domestic assets from the country's citizens by the country's central bank.In this arrangement, the country's money supply _______ be increased by the purchase of foreign assets from the country's citizens by the country's central bank. Select one: a. can / can also b. can / cannot c. cannot / can d. cannot / cannotarrow_forwardwhy is that currency exchange are measured in dollars?arrow_forwardThis summer has been very hot. In fact, many crops that need water to thrive have been suffering from dry conditions. Does poor weather, which reduces crop production, make the US dollar weaker or stronger?arrow_forward
- To ensure that paper money will be accepted, the U.S. government implicitly promises the public that Group of answer choices it will not change currency denominations so that the paper currencies U.S. citizens have will continue to be used for exchanges. the U.S. monetary system will always be backed by a precious metal. it will not print money so fast that it loses its value. it will not change the rate at which the dollar is exchanged for other currencies.arrow_forwardAll of the following are factors that cause supply and demand for currencies to change EXCEPT: A. relative interest rates B. relative income levels C. relative GDP levels D. relative inflation ratesarrow_forward
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