. Suppose you read that prospects for stronger futureeconomic growth have led the dollar to strengthen andstock prices to increase.a. What effect does the strengthened dollar have on theIS curve?b. What effect does the increase in stock prices have onthe IS curve?c. What is the combined effect of these two events onthe IS curve?

. Suppose you read that prospects for stronger futureeconomic growth have led the dollar to strengthen andstock prices to increase.a. What effect does the strengthened dollar have on theIS curve?b. What effect does the increase in stock prices have onthe IS curve?c. What is the combined effect of these two events onthe IS curve?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 25CTQ: If a countrys currency is expected to appreciate in value, what would you think will be the impact...

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If the Bank of Canada raises its target for the overnight interest rate from 3 percent to 3.25 percent while interest rates in other countries do not change, the result is of financial capital, in demand for Canadian dollars and of the Canadian dollar. O a. An outflow; a decrease; aldepreciation. O b. An inflow; a decrease; a depreciation. O c. An outflow; an increase; an appreciation. O d. An inflow; an increase; a depreciation. O e. An inflow; an increase; an appreciation.
If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.
7. For each of the following, specify whether the foreign direct investment is hori- zontal or vertical; in addition, describe whether that investment represents an FDI inflow or outflow from the countries that are mentioned. a. Vodafone (a U.K.-based company) plans to improve its network and services in Romania after the results in this market lagged behind other countries. b. General Electric (an American company) buys Alstom (another American company) energy assets. c. Exxon (an American company) plans the construction of new delayed coker unit in Belgium. d. PetroChina (a Chinese company) plans to invest in global oil and natural gas assets in a venture in Western Australia.
Answer the following questions 1.a. Today many Central Banks around the World are thinking of increasing interestrates. Why? What could be the dangers of increasing those interest rates toomuch?1.b.What will happen to the trade balance and the real exchange rate of a smallopen economy when govemment purchases increase, such as during a war?Does your answer depend on whether this is a local war or a global war? Onthose grounds, In the current situation of the Russian invasion, what shouldhappen between the dollar and the Euro?
A Moving to another question will save this response. Quèstion 16 What is the likely result from a depreciation of a nation's currency when its economy is already operating at its full-employment level of output? O A. Net exports would rise, but equilibrium GDP would fall. O B. Net exports would fall and contribute to demand-pull inflation. OC. Net exports would fall, but equilibrium GDP would rise. O D. Net exports would rise and contribute to demand-pull inflation. hp *****
In August 2015 investor sentiment shifted against the Chinese yuan. Investors sold the yuan and bought dollars, as financial capital flowed out of China, seeking better rates of return in other countries. What actions did China take in response to this situation? O China used $1 trillion of its foreign exchange reserves to purchase the yuan in an attempt to prevent further devaluation and tightened capital controls on financial outflows. O China loosened capital controls to encourage forcign investment into the Chinese economy. O China sold the yuan to encourage further depreciation in an attempt to improve its trade deficit. China's monetary authority sold tie yuan in an attempt to orevent fürther devaluation and raised interest rates to stem the outflow of forcige capital.
Economists John Maynard Keynes and John Hicks argued that, if hedgers tend to holdshort positions and speculators tend to hold long positions, the futures price of an assetwill be below the expected spot price. This is because speculators require compensationfor the risks they are bearing. They will trade only if they can expect to make money onaverage. Hedgers will lose money on average, but they are likely to be prepared toaccept this because the futures contract reduces their risks This is from John Maynard Keynes. My question is i dont understand this statement. Why is the future price of an asset to be below the expected spot price if speculators are the main determinant of the future price, they have a long contract which means they will earn money if the spot price is above the expected spot price
. Assume that the US economy expands and that the US Federal Reserve Bank, worried by rising inflation, decides to raise interest rates. Which of the following would not occur? A) The US dollar will appreciate. B) Interest rates in other countries will fall. C) The current account of the US's trading partners will improve. D) There will be a fall in US exports.
Question 10 d Anwser only question d please thank you Assume that there is a free-floating exchange rate. Will the following cause sterling toappreciate or depreciate relative to other currencies? In each case, you should considerwhether there is a shift in the demand or supply curves of sterling (or both) and whichway the curve(s) shift(s). You may assume that the impacts are ceteris paribus, that is,everything else remains the same. Illustrate your answers and give a short explanation interms of currency supply and demand.(a) UK imports increase. (b) UK interest rates rise relative to those abroad. (c) The UK experiences lower inflation than other countries, but with no change in interestrates. (d) Forex speculators believe that the Pound sterling will depreciate.
Which example of market expectations causes the dollar to appreciate against the yen-expectations that the U.S. economy will have: a) Higher inflation rates than Japan O b) Faster economic growth than Japan Oc) Higher future interest rates than Japan O d) More rapid money supply growth than Japan
You have been hired as a Marco Economist by the President of the United States to help evaluate the recentannouncement by Federal Reserve chairman Ben Bernanke that the FED will be increasing interest rates again.Ben Bernanke has justified the move on the grounds that the economy continues to be strong. Answer thefollowing questions. Provide a graphical explanation for your answers whenever possible. What is the effect on the foreign exchangemarket (the $ market)? 12. What impact will this have on imports?A. increaseB. decreaseC. remains unchanged 13. What impact does the change in the exchangerate have on aggregate demand?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged 14. What happens to the aggregate supply curve?A. increase (shifts to the right)B. decrease (shifts to the left)C. remains unchanged
The Foreign Exchange MarketThe Jamaican dollar experienced a rapid depreciation in the exchange rate during 2020 due to thepandemic's impact on key sectors. The exchange rate in 2020 closed at J$142.65 to US$1.00,after opening the year at J$132.57, resulting in a 7.6 per cent depreciation. As at FridaySeptember 16, 2022, the exchange rate was at approximately $ JA 150 to US $1.QUESTIONGiven this rapid depreciation of the Jamaican dollar against the US dollar,should the government of Jamaica adopt a Fixed Exchange Rate regime ormaintain the current Floating Rate regime?Outline to answering the question Clear distinction between fixed exchange rate and floating exchange rate, Examples of countries that uses fixed exchange rate regime and those that uses floatingexchange rate regime and Arguments for and against floating exchange rate