Macroeconomics
Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 21.A, Problem 1AP

Subpart (a):

To determine

The exchange rate between Zee and Aellar.

Subpart (b):

To determine

The exchange rate between Zee and Aellar.

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8. Suppose that last year, the nominal exchange rate between the Japanese yen and the British pound was ¥150.0 per £1.0, one unit of Japanese output cost ¥1300, and one unit of British output cost £8.0.a. What was the real exchange rate between the U.K. and Japan last year, expressed as the cost of British output (i.e. – the quantity of Japanese output that exchanges for 1 unit of British output)? In which country were goods more expensive last year?
Give typing answer with explanation and conclusion    Suppose that the current exchange rate is 1.48 euro = 1 pound, but it is expected to be 1.35 euro =1 pound in one year. If the current interest rate on a one-year government bond in the United Kingdom is 9 %, what does the interest-rate parity condition indicate the interest rate will be on a one-year government bond in Germany? Assume that there are no differences in risk, liquidity, taxation, or information costs between the bonds.   The German interest rate will be ________ %. (Round your response to two decimal places.)
1) Assume Turkish lira (TL) is expected to depreciate by 10% over the next year against US dollar. If the Turkish interest rate is15%, what would be the US interest rate that can make a Turkish investor to be willing to buy US securities today? Assume capital is perfectly mobile between Turkey and US. 2-) If the price level of Turkish goods is 200, the price level of foreign goods is 125, and the lira price of foreign currency is 1.20, what is the real exchange rate? What is the meaning of this rate for the competitiveness of Turkish goods? 3-)With the help of an IS-LM diagram show and explain the effect of restrictive monetary policy on output under flexible exchange rates and perfect capital mobility
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