Economics (6th Edition)
Economics (6th Edition)
6th Edition
ISBN: 9780134105956
Author: Hubbard
Publisher: PEARSON
Question
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Chapter 30, Problem 30.2RDE

Subpart (a):

To determine

The exchange rate, appreciation and depreciation of currency.

Subpart (b):

To determine

The exchange rate, appreciation and depreciation of currency.

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A country with higher nominal interest rates than its trading partners will see its exchange rate depreciate in value relative to the currencies of its trading partners in the long run. Is this statement true or false? Briefly explain why.
Q2-17 Refer to the following diagram to help you answer this question.Under fixed exchange rates, the automatic adjustment mechanism will lead to Select one: a. a fall in the money supply, a fall in income, and a fall in the interest rate. b. a rise in the money supply, a fall in income, and a fall in the interest rate. c. a fall in the money supply, a rise in income, and a rise in the interest rate. d. a fall in the money supply, a fall in income, and a rise in the interest rate.
The following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish but choose carefully - your sentence must make grammatical sense):demand   supply left right buy sell imports exports rise fall increases decreases   What happens to the current account balance and the exchange rate when the following happens?   Suppose that New Zealand firms become more profitable relative to foreign firms and so increase their payment of dividends (everything else held constant). The value for net foreign income therefore ________ and the value of the current account balance will _______.   Payment of NZ dividends to foreign owners affects the _______ or/of $NZ while payments of foreign dividends to NZ owners of foreign companies affects the _______ for/of $NZ.   Therefore the impact of the change in profit of NZ firms is…
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