EBK EXPLORING MACROECONOMICS
7th Edition
ISBN: 9780100546400
Author: Sexton
Publisher: YUZU
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Question
Chapter 21, Problem 7P
To determine
To evaluate:
The statement which states that statistical discrepancy is equal to zero when the balance of payment is equals to
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Based on the Balance of Payments in the table below, what is the statistical discrepancy?
In an economy the price of a basket of goods is 84 euros. In another economy the price of the same basket of goods is 234 crowns (the name of the local currency). Calculate the crown/euro
PPP exchange rate.
Answer
Explain very briefly about elasticity approach , national income approach , absorption approach , and monetary approach in balance of payments and specially current account balance.
Chapter 21 Solutions
EBK EXPLORING MACROECONOMICS
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- These three questions ask you to consider Purchasing Power Parity (PPP) adjustments, and related issues. To remind you, these issues were not linked to a specific chapter in class discussion, rather they were discussed throughout the whole unit. Two countries, A and B, have currencies A$ and B$ ("A dollars" and "B dollars"), respectively. The following table has data about the nominal exchange rate between the two currencies, the two countries' nominal GDP per capita, and the cost of the same consumption basket in the two countries. These two are in the two countries own currencies, as indicated in the table. For your convenience, the table also lists Country B's nominal GDP. capita, converted to Country A's currency.. Please spend a few minutes familiarizing yourself with the data in the table, before attempting any questions.arrow_forwardExplain how interest rate parity determines exchange rate equilibrium?arrow_forwardWould each of the following transactions be included in net exports or net capital outflow? Be sure to say whether it would represent an increase or a decrease in that variable. A Japanese buys some durians from a Malaysian farmer.arrow_forward
- If a country’s exchange rate depreciates what would be the most likely impact on exports, imports and the trade balance of the country?arrow_forwardFor a given level of output (Yf), will the current account balance (CA) vary inversely with the level of domestic absorption (A)? Why or why not? Explain.arrow_forwardPurchasing Power Parity (PPP) implies that the level of exchange rates adjusts so that identical goods cost the same amount in different countries. In many cases, the PPP is violated. Briefly explain drawing on the assumptions of absolute PPP. You are the trade advisor to a multinational company with an investment of US1,500,000. The following are the rates quoted on the FOREX market. US $ to Euro 1.22/€ US$ to pounds 1.84/£ Euros to pounds 1.54/£ Calculate the cross rate and determine if a profit opportunity exists. What is the value of that profit if you decide to trade with the US$1.5 million?arrow_forward
- Suppose you know that exports for a nation are $24 billion and imports are $25 billion, Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. Complete the balance of payments table below using the information above. Current Account (billions) Credits 24 $ Financial Account (billions) Credits Capital Account (billions) Credits Debits Debits Debits $30 $26 $4 $7 b. What is the net balance of each account? Current account: $[ billion Financial account: $ billion Capital account: $ billion c. What is the sum of all accounts? %24 billionarrow_forwardDistinguish between Exchange Rate Method and Purchasing Power Parity as methods of comparing Country GDP in terms of either income or expenditure through an examplearrow_forwardSo, what has happened to the USD-EUR exchange rate over the past year or two? Can you tell anything about what you would do from looking at the trends? Has the USD appreciated or depreciated vs. the EURarrow_forward
- The following table contains hypothetical data for Canada's balance of payments in a particular year. Exports of goods and services $160 Imports of goods and services $140 Primary income (investment income received from abroad) $15 Primary income (investment income paid from abroad) $25 Secondary income (Net transfers) $10 Foreign investment in Canada $220 Canadian investment abroad $240 Refer to the information above to answer this question. Which of the following reflects the state of Canada's capital account? Multiple Choice It has a deficit of $10 billion. It has a deficit of $20 billion. It has a surplus of $5 billion. It has a surplus of $30 billion.arrow_forwardIf ¥1 (Yen) equals $ 0.0093, what does $1 equal?arrow_forward
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