MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
8th Edition
ISBN: 9780134518312
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 34, Problem 3IAPA
To determine
To explain:
The factors effecting the appreciation of the dollar and the increase in the official reserves.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
If a small country, such as Argentina, attempts to fix its currency exchange rate with the United States,
its inflation rate must be higher than the U.S. inflation rate.
its interest rates will move together with the U.S. interest rates.
its currency value relative to the U.S. dollar will fluctuate over time.
its central bank will have full flexibility in monetary policy actions.
it must restrict the flow of funds with the United States.
The 1997 Asian crisis began when speculators attacked baht, the Thai currency. Thailand, like many Asian economies, had a fixed exchange rate system whereby the baht was fixed relative to the US dollar. The country was running substantial balance of payments deficits and was losing reserves as it was defending the exchange rate against the dollar. As markets realized that the government could not sustain the exchange rate any longer, investors shifted to other hard currencies. The Thai stock market index plunged by 50 percent within a year and banks were in danger of collapse as they had loaned funds using inflated assets as collateral. The domino effect also hit the other Asian economies as they were experiencing similar problems. Investors fled from the Philippines, Malaysia, and Indonesia, as expectations of a fall in their exchange rates grew stronger. The authorities in these countries were forced to abandon the exchange rate peg and, at the same time, Taiwan and Singapore also…
An increase in the supply of U.S. dollars by the Federal Reserve will
a. raise the value of the dollar because it will stimulate U.S. economic growth
b. reduce the value of the dollar because of inflation fears in the United States
c. decrease the value of the dollar because it will force other countries to raise their interest rates
d. raise the value of the dollar because it will lead to higher U.S. interest rates
Chapter 34 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
Ch. 34 - Prob. 1SPPACh. 34 - Prob. 2SPPACh. 34 - Prob. 3SPPACh. 34 - Prob. 4SPPACh. 34 - Prob. 5SPPACh. 34 - Prob. 6SPPACh. 34 - Prob. 7SPPACh. 34 - Prob. 8SPPACh. 34 - Prob. 9SPPACh. 34 - Prob. 10SPPA
Ch. 34 - Prob. 1IAPACh. 34 - Prob. 2IAPACh. 34 - Prob. 3IAPACh. 34 - Prob. 4IAPACh. 34 - Prob. 5IAPACh. 34 - Prob. 6IAPACh. 34 - Prob. 7IAPACh. 34 - Prob. 8IAPACh. 34 - Prob. 1MCQCh. 34 - Prob. 2MCQCh. 34 - Prob. 3MCQCh. 34 - Prob. 4MCQCh. 34 - Prob. 5MCQCh. 34 - Prob. 6MCQCh. 34 - Prob. 7MCQCh. 34 - Prob. 8MCQ
Knowledge Booster
Similar questions
- As the dollar appreciates against the yen, U.S. exports to Japan _____ and U.S. imports from Japan _____. rise; fall fall; fall fall; rise rise; rise none of the other answers are correctarrow_forwardWith a fixed exchange rate, if there is excess demand for the domestic currency then the central bank will Select one: a.buy domestic currency. b.sell foreign currency. c.buy domestic currency and sell foreign currency. d.sell domestic currency and buy foreign currency.arrow_forwardThe financial account balance of the Canadian balance of payments decreases in all of the following cases except one. Which? Please choose an answer: at. Decrease in international reserves held by the Bank of Canada; b. Increase in Canadian direct investment in Mexico. vs. Increase in foreign bonds held by Canadians; d. Decrease in American direct investment in Canada; e. Decrease in Canadian bonds held by non-residents of Canada;arrow_forward
- Monetary policy is influenced by foreign exchange markets. The link is the foreign assets that the central bank hold which mostly consist of deposits with foreign central banks denominated in foreign currencies, treasury bills and some gold. Explain why the central bank holds deposits with foreign banks and how these deposits influence the exchange rate, interest rate, inflation rate and monetary policy.arrow_forwardIf the central bank raises interest rates it will A) lower aggregate demand and raise the exchange rate. B) raise aggregate demand and lower the exchange rate. C) lower aggregate demand and lower the exchange rate. D) raise aggregate demand and raise the exchange rate.arrow_forwardhard currency implies a strong currency that is well supported by reserves. that coins are minted using a hard metal. a currency whose exchange rate cannot move above a hard ceiling. a stable currency that is hard to move.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning