Assume that initially PPP holds, if the inflation rate in your country falls relative to the inflation rate in the United States. The domestic currency is and will. Select one: a. undervalued; appreciate O b. undervalued; depreciate O c. remain unchanged O d. overvalued; appreciate e. overvalued; depreciate

Assume that initially PPP holds, if the inflation rate in your country falls relative to the inflation rate in the United States. The domestic currency is and will. Select one: a. undervalued; appreciate O b. undervalued; depreciate O c. remain unchanged O d. overvalued; appreciate e. overvalued; depreciate

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 9PA

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Assume that initially PPP holds, if the inflation rate in your country falls relative to the inflation rate in the United and will States. The domestic currency is. Select one: a. undervalued; depreciate O b. overvalued; depreciate O c. remain unchanged O d. overvalued; appreciate O e. undervalued; appreciate
Somebody has bought US Dollar with two-third of his money and Euro with one-third. Dollar has gained value overnational currency by 1.8 % each month and Euro 1.2 % each month. The average monthly inflation rate is 3. Find thepercentage loss of him/her at the end of a year.
(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?
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assume that initially, PPP holds, if the inflation rate in your country falls relative to the inflation rate in the United States. The domestic currency is ______ and will ________. select one a. overvalued; appreciate b. undervalued; appreciate c. overvalued; depreciate d. undervalued; depreciate e. remain unchanged
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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 expected inflation is 4% in the united kingdom and 1 % in the united states . if the relative ppp holds , the market would expect the paund to (a) deapreciate by 3% against the dollar (b) deapreciate by 8% against the dollar (c) appreciate by 3% against the dollar (d) appreciate by 5% against the dollar
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.