Macroeconomics
Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 9, Problem 18APA
To determine

Determine the reason why investors are expected to sell in Country L and buy in Country NY and fall in the pound makes the predicted effect of Brexit less likely.

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In July 2018 Yi Gang, Governor of the People’s Bank of China, said fluctuations in the foreign exchange market were mainly due to factors like a stronger U.S. dollar and external uncertainties.  How can fluctuations in the currency exchange rate affect a country’s economy
As the price level rises, the cost of borrowing money will (remain the same, fall, rise), causing the quantity of output demanded to (remain the same, fall, rise). This phenomenon is known as the (exchange rate, interest rate, wealth) effect.   When an economy’s price level rises, ceteris paribus, the domestic price level relative to the price level in other countries will (rise, fall). This means that domestic exports will be relatively (less, more) expensive than before, while foreign imports will be relatively (less, more) expensive than they were previously. The number of domestic products purchased by foreigners (exports) will therefore (remain the same, fall, rise), and the number of foreign products purchased by domestic consumers and firms (imports) will (remain the same, fall, rise). Net exports will therefore(remain the same, fall, rise), causing the quantity of domestic output demanded to(remain the same, fall, rise). This phenomenon is known as the (interest rate, open…
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