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Since Japanese interest rates have recently declined to very low levels, expect a reduction in U.S. interest rates." Explain this statement with the help of a graph.
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- What is the expected difference between interest rates in the United States and Japan? Are rates going up, going down or staying flat?10 Read the following paragraph and answer the question that follows. A number of factors have contributed to the performance of the South African economy. Firstly, the sizeable monetary injection into the local economy as a stimulus due to COVID economic pressures has given a boost to household disposable incomes over the course of 2021. The depreciation of the exchange rate in 2021 year also provided a boost to the domestic economy. Based on the information in the paragraph above, where is the South African economy in the economic cycle as per the figure above? a. contraction b. trough c. expansion d. peakThe following graph plots the forward premium for a foreign currency along the horizontal axis, while measuring the interest rate differential (between a home country and a foreign country) along the vertical axis. in refers to the interest rate in the home country, while if refers to the interest rate in a foreign country. On the following graph, use the blue line (circle symbol) to plot the combinations of the forward premium and interest rate differential that are consistent with interest rate parity (IRP). ih - if (%) 7 6 -7 -6 -5 -4 -3 -2 5 4 3 2 0 -1 -2 -3 -4 -5 -6 -7 -1 1 2 3 4 5 6 7 Forward Premium (%) IRP Line ?
- RUBLES PER KRONE RUBLES PER KRONE 3. Changes in the foreign exchange market The following questions focus on the exchange rate between the Russian ruble and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of rubles you must pay for one krone. Suppose a recession in Russia causes Russian incomes to decrease, while incomes in Denmark remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drap one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply of Kraner Demand for Kraner Demand for Kroner QUANTITY OF KRONER Supply of Kroner ? The decrease in Russian Incomes causes the Danish krone to relative to the Danish krone. relative to the Russian ruble and causes the Russian…The following graph depicts the supply schedule for euros. Hint: You can drag the black point (cross symbol) to various positions on the graph to see the values of the coordinates on the graph. You will not be graded for any changes you make to the graph. VALUE OF EURO (U.S. dollars per euro) 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY OF EUROS (Billions) At an exchange rate of 1.2 per euro, the quantity of euros supplied is of euros supplied is + ? billion euros, while at an exchange rate of 1.8 per euro, the quantity billion euros. This confirms that the supply schedule for euros is sloping.Suppose that the expected real interest rate in the United States is 3 percent per year while that in Europe is 5 percent per year. What do you expect to happen to the real dollar/euro exchange rate (number of USD per Euro) over the next year? Explain and justify your answer using the theories you have learned in chapter 16.
- Kindly answer this question as soon as you can For each of the following, specify whether the foreign direct investment is horizontal or vertical; in addition, describe whether that investment represents an FDI inflow or outflow from the countries that are mentioned. a. McDonald’s (a U.S. multinational) opens up and operates new restaurants in Europe. b. Total (a French oil multinational) buys ownership and exploration rights to oil fields in Cameroon. c. Volkswagen (a German multinational auto producer) opens some new dealerships in the United States. (Note that, at this time, Volkswagen does not produce any cars in the United States.) d. Nestlé (a Swiss multinational producer of foods and drinks) builds a new production factory in Bulgaria to produce Kit Kat chocolate bars. (Kit Kat bars are produced by Nestlé in 17 countries around the world.)3. Effects of a government budget deficit Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between different real interest rates and this economy's levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currently operating under a balanced government budget. Real Interest Rate (Percent) 7 6 5 REAL INTEREST RATE 10 8 0 4 3 2 0 National Saving (Billions of dollars) 60 Given the information in the table above, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market. 20 55 50 45 40 35 Domestic Investment (Billions of dollars) 30 35 40 Market for Loanable Funds 40 60 QUANTITY OF LOANABLE FUNDS 80 45 50 55 Net Capital Outflow (Billions of dollars) -15 -10 -5 0 5 100 O Demand -0 Supply…What does this graph show and what is the relationship between real exchange rate and net exports?
- Consider the exchange rate between Jamaica and Tunisia. Typically, exchange rates vary over time, sometimes quite dramatically. The scenarios present various changes that may affect the exchange rate. Indicate whether each scenario will tend to cause an appreciation or depreciation of, or have no effect on, the value of Jamaican dollars relative to Tunisian dinars. The magazine The Economist publishes an article indicating that analysts expect the value of Tunisian dinars to rise relative to Jamaican dollars. The central bank in Jamaica announces that it will raise interest rates on government bonds. Based on a World Bank report, the inflation rate in Jamaica will be 1% next year, whereas the inflation rate in Tunisia will be 10.5%. The price of a specific basket of goods in Jamaica is roughly 2.0 times higher than the price of an identical basket of goods in Tunisia, even after adjusting for the exchange rate. Answer Bank appreciate no effect depreciateWhat is the relationship between Gold prices and Dollar Index?The following graph depicts the foreign exchange market for euros. The blue line represents the demand schedule for euros, while the orange line represents the euro supply schedule. Suppose that real interest rates in France suddenly increase, while real interest rates in the United States remain stable. Use the graph to shift either the supply schedule, the demand schedule, or both, to depict the impact on the value of the euro. Then answer the question that follows. D QUANTITY OF EUROS As a result of this, the value of the euro is expected top VALUE OF EURO (U.S. dollars per euro)