Assume that the global average real interest rate is 5%. Britain witnesses severe inflation, where the current inflation rate is 10%. To curb inflation they decide to increase interest rates to 17%. Then the real rate of interest in Britain is results in increased the US dollar ($). which is for British bonds and in turn causes the British pound (£) to O 10%; higher; supply; depriciate O7%; higher; demand; appreciate O 7%; higher; demand; depriciate than the global average, which against
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- Assume that the export price of a Sony Smartphone from Naguya, Japan is VIS. The exchange rate is 87.60S. The forecast rate of inflation in the United States is 22% per year and is 1,5% per year in Japan. Use this data to answer the following questions on exchange rate pass through. a. What was the export price for the Sony Smartphone at the begianing of the year expressed in U.S. dollars? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? e. Assuming 100% pass-through of exehange rate, what will the dollar price of a Sony Smartphone be at the end of the year? nini d. Assuming 80% pass-through, what will the dollar price of a Sony Smartphone be at the end of the year?Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. (i) What is the nominal exchange rate?e - enor-P Use the expression: rea! - PrOT ,where ereal is real exchange rate, enor is nominal exchange rate, P is domestic price level and Pro, is foreign price level (ii) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change?Assume that initially nominal exchange rate is E1=4 ($1 = ±4) and domestic (Turkey) inflation rate is TTR=10% percent while the US inflation rate is tUS*=0%. If %3D export value of Turkey equals ± 200 billion and it's import is $80 billion. Initially Turkey NX (net export) would display t billion deficit. If the nominal exchange rate increases suddenly from E1=4 to E2=5,5 while the price levels are still fixed (at the first step of J Curve) NX would be t billion deficit in short run. If the real exchange rate elasticity of export is 0,4 and real exchange rate elasticity of import is -0,4. NX would converge to t billion deficit in long run.
- Which of these is an export for the UK economy? Selectați răspunsul corect: O a. Chinese tourists buying a cake in an English tea shop O b. UK car manufacturer buying Chinese steel O. An English lourist buying a colfee in Paris O d. An English football club buying a French footballer Strong inflationary expectations tend to discourage: Selectați răspunsul corect: O a. and harm collectors of gold coins. O b. saving and reduce inflationary pressure. curIsumplion and encouraye investmenl O d. saving and enhance infiationary pressure. O e. borrowing and encourage saving.In 2020, inflation rate in UK is 4.5% and in Spain it is 4.1%. In 2021, inflation rate in UK is 7.3% and in Spain it is 6.9%. In 2020 1.47EURO / GBP. Assume UK is home country. What is the expected exchange rate in 2022 (2 years later)? Select one: O a. 0.675 O b. 1.465 O c. 1.464 O d. 1.459(b) Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. (i) What is the nominal exchange rate? Use the expression: ereal= enor*P / Pfor where ereal is real exchange rate, enor is nominal exchange rate, P is domestic price level and Pfor is foreign price level. (ii) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change?
- New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall....a weak kiwi dollarmeans importing is more expensiveWhile we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low, the slower it will take for those inflation rates to fall, ASB senior economist Mark Smith said Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c. a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "Interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy," saidSmithBut Finance Minister Grant…New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall....a weak kiwi dollarmeans importing is more expensiveWhile we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low, the slower it will take for those inflation rates to fall, ASB senior economist Mark Smith said Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c. a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "Interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy," saidSmithBut Finance Minister Grant…AE Ap Ap suggests that p where E is domestic price of one unit of foreign currency (e.g., Rs100 = $1) Q.23 Purchasing power parity which can be written as A. The home currency will appreciate if the current home inflation exceeds the current foreign inflation rate. B. The home currency will appreciate if the current foreign inflation rate exceeds the current domestic inflation rate. C. The home currency will depreciate if the current home interest rate exceeds the current Foreign interest rate D. The home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate. E. Both B and D are correct.
- Discuss Fiat, Seingiorage and Petro Dollar1. a) Is the following graph about the "Purchasing Power of the Diminishing Dollar" misleading? Why or why not? GELİNAARADICS ANKAPILA 1998-ESENHOWR$1.00 WERNER FALT THE END OF AMERICA ELEMEN 5-% JUVE SANA 1993-MINNE94 THE EMERS Purchasing Power of the Diminishing Dollar 1968-JOHNSON 1973-MXON M 1978-CARTER A b) Provide a time-series graph that accurately reflects the data: [(1978- Carter, $0.44), (1973- Nixon, $0.64), (1968- Johnson, $0.83), (1963- Kennedy, $0.96), (1958-Eisenhower, $1.00).Supply Demand Supply Demand QUANTITY (dolars) These fears would cause the demand for dollars to , and the sup ply of dollars to leading to In the euro/dollar exchange rate. PRICE OF DOLLARS (euros per dollar)