MICROECONOMICS - CONNECT ACCESS
21st Edition
ISBN: 9781264197071
Author: McConnell
Publisher: MCG
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Question
Chapter 27, Problem 3DQ
To determine
The balance of payments.
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Advanced Analysis: Refer to the following table, in which Qd is the quantity of loonies demanded, P is the dollar price of loonies, Qs is the quantity of loonies supplied in year 1, and Qs' is the quantity of loonies supplied in year 2. All quantities are in billions. Further, assume that the exchange rate is fixed at 110.
Qd
P
Qs
Qs'
10
125
30
20
15
120
25
15
20
115
20
10
25
110
15
5
Instructions: Enter your answers as whole numbers.
a. In year 1, what would be the minimum initial size of the U.S. reserve of loonies such that it could maintain the peg throughout the year?
billion loonies
b. What about the minimum initial size that would be necessary at the start of year 2?
billion loonies
Next, consider only the data for year 1.
c. What peg should the United States set if it wants the fixed exchange rate to increase the domestic money supply by $1.2 trillion?
dollars per loonie
Suppose that the price of a commodity is 3 50 in
Suppose that the price of a commodity is $3.50 in the United States and €4 in the European Monetary Union and the actual exchange rate between the dollar and the euro is R = $1/€1, but, the equilibrium exchange rate R′ = $0.75/€1.
(a) Will the United States import or export this commodity?
(b) Does the United States have a comparative advantage in this commodity?
Suppose that the price of a commodity is 3 50 in
Suppose that currency market for Mexican pesos and Canadian dollars is initially in equilibrium, with 10 pesos trading for 1 Canadian dollar. Because of a new trade agreement, there has been a shift in the demand for pesos due to a sudden increase in the capital inflow from Canada to Mexico.
What is the effect of the capital inflow on the exchange rate of pesos for Canadian dollars? Explain and show grahically. On your graph, Quantity of Canadian dollars should be on the vertical axis and the Exchange rate (Mexican pesos per Canadian dollar should be on the vertical axis.
Chapter 27 Solutions
MICROECONOMICS - CONNECT ACCESS
Ch. 27.1 - Prob. 1QQCh. 27.1 - Prob. 2QQCh. 27.1 - Prob. 3QQCh. 27.1 - Prob. 4QQCh. 27.A - Prob. 1ADQCh. 27.A - Prob. 1ARQCh. 27.A - Prob. 1APCh. 27 - Prob. 1DQCh. 27 - Prob. 2DQCh. 27 - Prob. 3DQ
Ch. 27 - Prob. 4DQCh. 27 - Prob. 5DQCh. 27 - Prob. 6DQCh. 27 - Prob. 7DQCh. 27 - Prob. 8DQCh. 27 - Prob. 9DQCh. 27 - Prob. 10DQCh. 27 - Prob. 11DQCh. 27 - Prob. 1RQCh. 27 - Prob. 2RQCh. 27 - Prob. 3RQCh. 27 - Prob. 4RQCh. 27 - Prob. 5RQCh. 27 - Prob. 6RQCh. 27 - Prob. 7RQCh. 27 - Prob. 8RQCh. 27 - Prob. 9RQCh. 27 - Prob. 10RQCh. 27 - Prob. 1PCh. 27 - Prob. 2PCh. 27 - Prob. 3PCh. 27 - Prob. 4PCh. 27 - Prob. 5P
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