If in a country the tariff rates rises and at the same time the personal income tax rates in the country falls, what happens to the exchange rates? sketch a graph and explain please
Q: The price of a laptop in Canada is C$1,000. The price of a car in Germany is 10 000 euros. The…
A: International trade refers to the buying and selling of goods and services across the borders. The…
Q: Explain, with the aid of a graph, what will happen to the rand/dollar exchange rate and the…
A: The exchange rate is USD per Rand. Now, when the US buys anything from South Africa, it converts USD…
Q: Data from The Economist BigMac index from January 2022 shows that the local price of a Big Mac in…
A: Purchasing Power Parity The Theory of Purchasing power compares the currencies of Different…
Q: What is one of the ways governments can influence exchange rates?
A: the government uses the exchange rate tool to achieve multiple objectives such as full employments,…
Q: Suppose there is a country "A", the currency of A is "X". Suppose that for some reason, the world's…
A: The exchange rate is defined as the price of a nation's domestic currency in terms of another…
Q: what excactly is a fixed exchange rate and give an example of a country that has a fixed exchange…
A: "The rate at which one country's money is exchanged for another country's currency is known as the…
Q: ive recommendation on how to manage exchange rates
A: Fixed exchange rate policy A fixed exchange rate provides stability to a currency. Examples of…
Q: In the picture below is the table to answer this question. The highlighted one is my guess which is…
A: As given in the table in 2014 $1 USD = $1.25 CAD In 2015 $1 USD = $1.35 CAD In 2016 $1 USD = $1.45…
Q: Travis takes two trips to Ecuador. On his first trip, he finds that one US dollar is worth 25000…
A: The ER(exchange rate) tells us the value of one nation’s currency in terms of the other. When Travis…
Q: in a country the tariff rates rises and at the same time the personal income tax rates in the…
A: The total amount of money that persons and corporations in an economy have decided to save and lend…
Q: Discuss why the demand and/or supply of a currency would shift, and the impact this would have on…
A: The open economy macroeconomics mainly deals with the change in the exchange rates. The change in…
Q: Using Diagrams show the impact on a country’s exchange rate when: a. Rise in the domestic price of…
A: a. Rise in the domestic price of exports will increase the export as they are getting higher prices.…
Q: now how to demonstrate movements of exchange rates using supply and demand graphs
A: The currency rate swings from day to day in this system due to market forces of demand and supply.
Q: Explain how changes in interest rates are likely to affect exchange rates.
A: The exchange rate reflects the price of one country's currency in terms of foreign country's…
Q: What is the relation between exchange rate and balance of payments . -Appreciated currency…
A: BOP is a statement comprising of all the transactions between individuals of a country with the…
Q: What is an exchange rate and why would a government want to maintain a fixed exchange rate?
A: Exchange Rate can be defined as expressing one currency in the terms of another currency. For…
Q: Using the concept of "carry trade," explain how a decrease in U.S. interest rates could affect the…
A: Carry trade is a strategy when the funds are withdrawn from the country with low rate of interest…
Q: Explain how exchange rates are determined in international business
A: Exchange rate refers to the rate at which one country's currency can be exchanged for any other…
Q: Discuss how the value of a currency under flexible exchange rates is determined?
A: Answer: Introduction: The exchange rate refers to the price of one currency in terms of another…
Q: Using Diagrams show the impact on a country’s exchange rate when: a. Capital movements (short term…
A: Foreign exchange market is a global market place where exchange rate of foreign currencies around…
Q: Explain the factors that might cause a country’s exchange rate to depreciate.
A: A fall in the conversion scale/exchange rate is known as a depreciation in the conversion scale. It…
Q: Using the concept of "carry trade," explain how a decrease in U.S. interest rates could affect the…
A: Carry trade refers to the situation in which to gain benefits investors withdraw funds from a…
Q: In the Mundell-Flemming model with floating exchange rates, explain what happens to aggregate…
A: Answer: Introduction: Mundell-Flemming model explains open economy macroeconomic adjustments under…
Q: Explain, with the aid of a graph, what will happen to the rand/dollar exchange rate and the…
A: The nations around the world tend to get involved in trade with each other, where the nations sale,…
Q: What is capital flight? When a country experiences capital flight, what is the effect on its…
A: Capital flight refers to the situation where assets or money rapidly flows out of the country…
Q: How does covered interest arbitrage affect the exchange rates
A: By understanding the interest arbitrage and bringing in the interest arbitraging interest rate…
Q: If a small open economy cuts defense spending, what happens to saving, investment, the trade…
A: Meaning of Exchange Rate: The term exchange rate refers to the situation under which a particular…
Q: hich of the following increases the demand for foreign exchange? a. Export of goods and services…
A: Foreign exchange demand is increased when the country pay more amount of money to other nation by…
Q: We discussed how costs of living are different in different countries and a mere conversion of…
A: In order to make comparisons between countries that are using different currencies, it is necessary…
Q: Give an example of how a change in the exchange rate alters the relative price of domestic goods in…
A: Exchange rate: - the exchange rate is the rate at which the currency of one country can be exchanged…
Q: Suppose 55 percent of Mexico’s trade is with the United States, 20 percent of trade is with Canada,…
A: Percentage of Mexico's trade with the US = 55% Percentage of Mexico's trade with the Canada = 20%…
Q: What is the definition of the nominal exchange rate? What would cause the demand for the foreign…
A: Nominal exchange rate: The nominal exchange rate is the amount of domestic currency needed to…
Q: If a country consistently runs net export surpluses, then what will happen to its exchange rate?
A: A trade surplus occurs when the result of the above calculation is positive. A trade surplus…
Q: For small, open economies that export and import a large volume of goods and services, a fixed…
A: In the international market, exchange rate are determine under fixed or flexible exchange rate…
Q: What are the short-run and long-run determinants of exchange rates, under the condition of free…
A: The value attached to a particular nation's currency in comparison/relation with that of another…
Q: Fixed Exchange rate is too expensive to be implemented," do you agree? Explain.
A: A fixed exchange rate, sometimes known as a pegged exchange rate, is an exchange rate regime in…
Q: Explain, with the aid of a graph, the effect on the rand/dollar exchange rate and the equilibrium…
A: Exchange rate refers to the amount of domestic currency that required to purchase one unit of…
Q: Show graphically and explain how increasing import influence exchange rate
A: The equilibrium of trade influences cash trade rates through its effect on unfamiliar trade supply…
Step by step
Solved in 3 steps with 2 images
- Explain briefly whether each of the following would be more likely to lead to a higher level of trade for an economy, or a greater imbalance of trade for an economy. Living In an especially large country Having a domestic investment rate much higher than the domestic savings rate Having many other large economies geographically nearby Having an especially large budget deficit Having countries with a tradition of strong protectionist legislation shutting out importsOccasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?If countries reduced trade barriers, would the international flows of money increase?
- Suppose the United States decides to subsidize theexport of U.S. agricultural products, but it does notincrease taxes or decrease any other governmentspending to offset this expenditure. Using a threepanel diagram, show what happens to nationalsaving, domestic investment, net capital outflow, theinterest rate, the exchange rate, and the trade balance.Also explain in words how this U.S. policy affects theamount of imports, exports, and net exports.Evaluate the following statement: "if lower exchange rates increase a nation's exports, the govermment should do everything in its power to anure that the exchange rate for its cumency is an low as it can possbly be This statement does nat acknowledge that lower exchange rates OA couid result in a reluctance from other countries to accept this nation's currency for payment of any goodn or services OB. could make a currency virtually worthless. O C. make a nation's imports more expensive. COD. None of the above responses are acknowledged by the statement.What is the difference between depreciation and devaluation? O There is no difference. O Depreciation refers to a fixed exchange rate, while devaluation refers to a floating exchange rate. O Depreciation refers to a floating exchange rate, while devaluation refers to a fixed exchange rate.
- 1. Illustrate through a graph the following and explain each graph:A. Use the foreign exchange market (Philippine pesos in the vertical axis, quantity of US dollars in thehorizontal axis, demand curve and supply curve of US dollars) to show the effect of the following onthe equilibrium exchange rate (one graph each of i and ii and assume other factors constant): i.) increase in foreign interest ratesii.) increased preference for Philippine products by foreigners. B. Illustrate using the AD-AS model how an increase in the exchange rate or depreciation of the peso willaffect real GDP and price level in the domestic economy (other factors constant).C. Use the loanable funds market and illustrate graphically how an increase in net capital outflow willaffect domestic interest rates and investment. Briefly explain your illustration.Assume that American rice sells for $100 per bushel,Japanese rice sells for 16,000 yen per bushel, and thenominal exchange rate is 80 yen per dollar.a. Explain how you could make a profit from thissituation. What would be your profit per bushelof rice? If other people were to exploit the sameopportunity, what would happen to the price of ricein Japan and the price of rice in the United States?b. Suppose that rice is the only commodity in theworld. What would happen to the real exchangerate between the United States and Japan?Suppose that the euro is trading at $1.10 per euro in the foreign exchange market. Next, suppose that the exchange rate falls to $0.73 per euro, due to falling Interest rates In the eurozone. The followIng graph shows the supply and demand curves for dollars In the forelgn exchange market. On the following grah, shift ether the supply curve for dollars or the demand curve for dollars to reflect the tnfluence of "carry trade" (In isolation from other factors that may affect the exchange rate) on the exchange rate for dollars. (Hint: Carefully consider whtch price is measured on the vertical axts and which currency Is being measared on the hortzontal axis.) O dalas Dalas QUANTITY (dolars) PRICE OF DOLLARS (euros per dollar)
- Consider a country with a flexible exchange rate, and which initially has a current account surplus of zero. Then, suppose there IS an anticipated InCrease in tuture total tactor productivity. a) Determine the eauilibrium etects on the domestic economv in the case where there are no capita. controls. In particular, show that there will be a current account dehicit when arms and consumers anticipate the increase in future total factor productivity. b) Now, suppose that the government dislikes current account deficits, and that It imposes capital controls in an attempt to reduce the current account deficit. With the anticipated increase in future total factor productivity, what will be the equilibrium efects on the economy? Do the capital controls have the desired efect on the current account deficit? Do capital controls dampen the effects of the shock to the economy on output and the exchange rate? Are capital controls sound macroeconomic policy in this context? Why or why not?Assume that American rice sells for $100 per Japanese rose sell for 1600 yen per bushel and norminal exchange rate is 80 yen per dollar . Explain how you would make a profit from this situation what would be your profit per bushel of rice .What happens if there is a shortage or a surplus of Canadian dollars in the foreign exchange market? *** If a shortage of Canadian dollars occurs in the foreign exchange market, the and the exchange rate A O A. quantity of Canadian dollars demanded increases and the quantity of Canadian dollars supplied decreases; falls OB. demand for Canadian dollars increases and the supply of Canadian dollars decreases; rises OC. quantity of Canadian dollars demanded decreases and the quantity of Canadian dollars supplied increases; COLL 120- 110 100+ 90- 80- 70- Exchange rate (U.S. cents per Canadian dollar) S 60+ D