Exploring Macroeconomics
7th Edition
ISBN: 9781285859446
Author: Sexton, Robert L.
Publisher: Cengage Learning
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Question
Chapter 21, Problem 6P
To determine
(a)
To explain:
The effect on the supply curve of dollars in the market of currency.
To determine
(b)
To explain:
The effect on the supply curve of dollars in the market of currency.
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Suppose that the exchange rate falls from 84 yen per U.S. dollar to 71 yen per U.S. dollar.
What is the effect of this change on the quantity of U.S. dollars that people plan to sell in the foreign exchange market?
The quantity of U.S. dollars that people plan to sell in the foreign exchange market
A. decreases and the supply curve of U.S. dollars shifts leftward
B. increases and the supply curve of U.S. dollars shifts rightward
C. increases and a movement up along the supply curve for U.S. dollars occurs
D. decreases and a movement down along the supply curve of U.S. dollars occurs
If there is a decrease in the desire of foreigners to purchase goods and services from the United States and a lower desire to invest in U.S. banks and businesses, then how would this affect the U.S. foreign exchange market?
A. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would depreciate.
B. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would appreciate.
C. The equilibrium quantity of foreign currency would increase and the U.S. dollar would depreciate.
D. The equilibrium quantity of foreign currency would increase and the U.S. dollar would appreciate.
The graph shows the demand curve for U.S. dollars.
Draw a new demand curve that shows the effect of an increase in the
world demand for U.S. exports. Label it.
A change in the expected future exchange rate changes the demand for U.S.
dollars and a change in the world demand for U.S. exports changes the
demand for U.S. dollars
A. today; in the future
B. in the future; today
C. in the future; in the future
D. today; today
160
140-
120-
100-
80-
60-
40+
Exchange rate (yen per U.S. dollar)
Do
1.3
1.5
1.6
1.7
1.4
Quantity (trillions of U.S. dollars per day)
>>> Draw only the objects specified in the question.
1.8
Knowledge Booster
Similar questions
- In the foreign currency market for U.S. dollars: Which of the following would be correct? U.S. residents are on the supply curve U.S. residents are on the demand curve Foreign residents are on the supply curve Foreign residents are on the demand curvearrow_forwardIf a strike takes place in France, making it harder to buyFrench goods, what will happen to the value of the U.S.dollar?arrow_forwardWhich of the following gives rise to transaction demand for a currency? A Chinese investor buys U.S. T-bonds, expecting dollars to appreciate. The Bank of Japan sells yen in the foreign currency markets. A Japanese car maker pays a U.S. engine manufacturer in dollars.arrow_forward
- Will an increase in attractiveness of the US as a tourist destination DECREASE or INCREASE the value of US dollar?arrow_forwardOther things the same, if the U.S. price level falls, then the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.arrow_forwardYou own a local company. In the past year, you successfully expanded your sales market into Europe, and you now have profits and cash denominated in euros. You want to convert the euros to your home country currency to repatriate the profits and pay taxes. You are a. not required to convert the euros to the home currency to pay taxes. b. a demander of the euro in the foreign exchange market. c. a supplier of your home country's currency in the foreign exchange market. d. a demander of your home country's currency in the foreign exchange market.arrow_forward
- Please label your answers to the following questions clearly. (a) Outline two factors that affect the demand for a currency and two factors that affect its supply. (b) Imagine that the diagram below respresents the market for the Australian Dollar. Refer to this diagram in explaining what would happen to the value of the Australian Dollar if Australia suddenly experienced an increase in its inflation rate relative to that of its trading partners. ER SAUD ER, DAUD Quantity of AUDarrow_forwardSuppose that the Federal Reserve cannot convince the public of its commitment to fight inflation in the United States in the near future. a) What would be the effect on the expected appreciation of the U.S. dollar? b) What would be the effect on the spot exchange rate for the U.S. dollar? Explain your answer using a graph.arrow_forwardWhich of the following affects the demand for U.S. dollars in the foreign exchange market? Multiple Choice domestic demand for U.S. stocks domestic demand for U.S.-made cars foreign demand for U.S. exports European demand for eurosarrow_forward
- Use the following table, which shows the supply and demand schedules for the euro, to answer the next question. Quantity of Euros Price Supplied 400 360 300 286 267 Multiple Choice $1.10 1.00 0.90 0.80 0.70 O If the U.S. government decides to fix or peg the price of the euro at $1.00, it would have to buy 360 euros. sell 160 euros. buy 100 euros. Quantity of Euros Demanded 100 sell 360 euros. 200 300 400 500arrow_forwardAs the price level rises, the interest rate a- rises, so the supply of dollars in the market for foreign currency exchange shifts right. b- rises, so the supply of dollars in the market for foreign currency exchange shifts left. c- falls, so the supply of dollars in the market for foreign currency exchange shifts left. d- falls, so the supply of dollars in the market for foreign currency exchange shifts right.arrow_forwardThe image provided shows the foreign exchange market of the Egyptian pound. The initial position is X. Egyptians then take more vacations abroad and Egyptian firms sell fewer exports. What is the new equilibrium position? (Pick either a, b, c, or d) a)K b) L c)M d)Jarrow_forward
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