Economics Plus MyLab Economics with Pearson eText (2-semester Access) -- Access Card Package (6th Edition) (The Pearson Series in Economics)
6th Edition
ISBN: 9780134417295
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 30, Problem 30.2.15PA
To determine
Impact of change in the value of euro on the Danish’s central bank action.
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Although it is a member of the European Community, Denmark is not part of the
eurozone; it has its own currency, the krone. Because the krone is pegged to the
euro, Denmark's central bank is obliged to maintain the value of the krone within
2.25 percent either above or below the value of the euro. According to an article
in the Wall Street Journal,
in 2017, the Danish central bank was forced to intervene in foreign currency
markets "to keep the krone from strengthening too much."
If the krone was strengthening, did it take more kroner to exchange for a euro or
fewer kroner? Briefly explain.
More kroner, because the krone has more value.
Fewer kroner, because the krone has less value.
Fewer kroner, because the krone has more value.
More kroner, because the krone has less value.
For many years, the Chinese currency has been pegged to the U.S. dollar. Critics argue that this policy has resulted in an unfair advantage for Chinese manufacturers exporting product to the U.S., and has contributed to ballooning U.S. trade deficits. Pressure to revalue, including threats of trade sanctions against China, has led the Chinese government to adopt a slightly more flexible policy which pegs the Yuan to a basket of currencies rather than the dollar alone. Some in the U.S. continue to argue that this is not sufficient, and continue to exert pressure toward a policy of further revaluation. Chinese leaders feel that increasing the value of the yuan relative to the dollar would contribute to economic and political instability in China.
Details:
Pressures for Change
China fixed the value of its currency in 1994 to the US currency
Due to arguments that the yuan was undervalued and that the Chinese government needed to free the currency, the U.S. administration announced…
At the start of 1996, the annual interest rate was 8 percent in the United States and 4.8 percent in Japan. The exchange rate was 110 yen per dollar at the time. Mr. Jorus, who is the manager of a Bermuda-based hedge fund, thought that the substantial interest advantage associated with investing in the United States relative to investing in Japan was not likely to be offset by the decline of the dollar against the yen. He thus concluded that it might be a good idea to borrow in Japan and invest in the United States. At the start of 1996, in fact, he borrowed ¥1,000 million for one year and invested in the United States. At the end of 1996, the exchange rate became 120 yen per dollar. How much profit did Mr. Jorus make in dollar terms?
Chapter 30 Solutions
Economics Plus MyLab Economics with Pearson eText (2-semester Access) -- Access Card Package (6th Edition) (The Pearson Series in Economics)
Ch. 30.A - Prob. 1RQCh. 30.A - Prob. 2RQCh. 30.A - Prob. 3RQCh. 30.A - Prob. 4RQCh. 30.A - Prob. 5RQCh. 30.A - Prob. 6RQCh. 30.A - Prob. 7PACh. 30.A - Prob. 8PACh. 30.A - Prob. 9PACh. 30.A - Prob. 10PA
Ch. 30.A - Prob. 11PACh. 30.A - Prob. 12PACh. 30.A - Prob. 13PACh. 30.A - Prob. 14PACh. 30.A - Prob. 15PACh. 30.A - Prob. 1RDECh. 30 - Prob. 30.1.1RQCh. 30 - Prob. 30.1.2RQCh. 30 - Prob. 30.1.3PACh. 30 - Prob. 30.1.4PACh. 30 - Prob. 30.1.5PACh. 30 - Prob. 30.1.6PACh. 30 - Prob. 30.2.1RQCh. 30 - Prob. 30.2.2RQCh. 30 - Prob. 30.2.3RQCh. 30 - Prob. 30.2.4RQCh. 30 - Prob. 30.2.5PACh. 30 - Prob. 30.2.6PACh. 30 - Prob. 30.2.7PACh. 30 - Prob. 30.2.8PACh. 30 - Prob. 30.2.9PACh. 30 - Prob. 30.2.10PACh. 30 - Prob. 30.2.11PACh. 30 - Prob. 30.2.12PACh. 30 - Prob. 30.2.13PACh. 30 - Prob. 30.2.14PACh. 30 - Prob. 30.2.15PACh. 30 - Prob. 30.2.16PACh. 30 - Prob. 30.2.17PACh. 30 - Prob. 30.2.18PACh. 30 - Prob. 30.2.19PACh. 30 - Prob. 30.2.20PACh. 30 - Prob. 30.3.1RQCh. 30 - Prob. 30.3.2RQCh. 30 - Prob. 30.3.3PACh. 30 - Prob. 30.3.4PACh. 30 - Prob. 30.3.5PACh. 30 - Prob. 30.1RDECh. 30 - Prob. 30.2RDECh. 30 - Prob. 30.3RDE
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