Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. If the supply curve for USD shifted from 100+e. to 104+e. bln dollars per week and the demand curve shifted from 140-e to 142 - e bln dollars per week, then the exchange rate changed by percent.
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- Does a higher rate of return in a nations economy, all other things being equal, affect the exchange rate of its currency? If so, how?QUESTION 2 N Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. If the supply curve for USD shifted from 100+e to 104+eN bln dollars per week and the demand curve shifted from bln dollars per week, then the exchange rate changed by 140-e - eN to 142-eN percent. Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front of your answer, i.e, "-999.99".N N QUESTION 3 Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. Initially, the supply curve for USD is 100+ e bln dollars per week and the demand curve is 140-e bln dollars per week. There is a financial crisis in Mexico and the government fears that it may lead to capital outflows that would make the crisis even worse. They decide that if Mexican Peso depreciates by more than 20%, the central bank will step in and fix the exchange rate. As the crisis unfolds the demand for the U.S. dollars increases to 142-e and the supply of dollars falls to 99+ e How should the central 'N' bank of Mexico react to this change? N O A. start selling U.S. dollars to support the exchange rate O B. start buying U.S. dollars to support the exchange rate O C. reduce money supply in the economy O D. do nothing
- The demand for Australian dollars in the foreign exchange market equals 14000 – 3000e and thesupply of Australian dollars in the foreign exchange market equals 2000 + 2000e, where e is thenominal exchange rate expressed in euros per Australian dollar. If the Australian dollar is fixed at 2euros per Australian dollar, then to maintain this fixed rate, what is the required change in theReserve Bank of Australia’s holdings of euros? 1increase by 4000 euros 2decrease by 2000 euros 3decrease by 4000 euros 4increase by 2000 eurosGive typing answer with explanation and conclusion Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. Initially, the supply curve for USD is 100 + eN bln dollars per week and the demand curve is 140 - eN bln dollars per week. There is a financial crisis in Mexico and the government fears that it may lead to capital outflows that would make the crisis even worse. They decide that if Mexican Peso depreciates by more than 20% the central bank will step in and fix the exchange rate. As the crisis unfolds the demand for the U.S. dollars increases to 142 - eN and the supply of dollars falls to 99 + eN. How should the central bank of Mexico react to this change?(b) Suppose in month t the monthly nominal interest rate is i 0% in Japan and i = 5% in South Africa. Suppose further that in month t a speculator invests 500 million yen in carry trade for one month. Let & be the nominal exchange rate in t, defined as the 4 rand price of one yen. Suppose that between t and t +1 the yen appreciates by 2% percent. Did the speculator gain or lose and by how much? Express your answer in yen.
- 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 Arguments for and against fixed exchange rate.Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. Initially, the supply curve for USD is 100+e, bln dollars per week and the demand curve is 140 - e„bln dollars per week. There is a financial crisis in Mexico and the government fears that it may lead to capital outflows that would make the crisis even worse. They decide that if Mexican Peso depreciates by more than 20%, the central bank will step in and fix the exchange rate. As the crisis unfolds the demand for the U.S. dollars increases to 142-e and the supply of dollars falls to 99+ e N' How should the central bank of Mexico react to this change? O A. start selling U.S. dollars to support the exchange rate O B. start buying U.S. dollars to support the exchange rate O C. reduce money supply in the economy O D. do nothing QUESTION 4 bln dollars per week and the demand curve is 155 -e bln dollar Using information from problem 3, suppose that the financial crisis worsens and now the supply curve for USD is 91+e.…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
- Question 10 a b and c 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.change rate $1.75 1.50 1.25 1.00 200 500 S d 700 900 950 1,000 S D₂ Quantity of euros traded (millions per day) 17) Refer to Figure 30-8. The equilibrium exchange rate is at A $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. At the pegged exchange rate A) there is a shortage of euros equal to 200 million. B) there is a surplus of euros equal to 700 million. Othere is a shortage of euros equal to 500 million. D) there is a surplus of euros equal to 300 million.Purchasing-power parity holds between the nationsof Ectenia and Wiknam, where the only commodityis Spam.a. In 2020, a can of Spam costs 4 dollars in Ecteniaand 24 pesos in Wiknam. What is the exchange ratebetween Ectenian dollars and Wiknamian pesos?b. Over the next 20 years, inflation is expected to be3.5 percent per year in Ectenia and 7 percent peryear in Wiknam. If this inflation comes to pass,what will the price of Spam and the exchangerate be in 2040? (Hint: Recall the rule of 70 fromChapter 27.)c. Which of these two nations will likely have ahigher nominal interest rate? Why?d. A friend of yours suggests a get-rich-quickscheme: Borrow from the nation with the lowernominal interest rate, invest in the nation with thehigher nominal interest rate, and profit from theinterest-rate differential. Do you see any potentialproblems with this idea? Explain.