2.4) Explain why according to the International Fisher Effect (IFE), a higher interest rate would lead to a currency depreciation. Provide example with illustration
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2.4) Explain why according to the International Fisher Effect (IFE), a higher interest rate would lead to a currency
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- Discuss The import substitution strategy in the context of a country's large trade deficits with key international partners?If Canada increase its export of lithium, in such a way that national exports would increase, would that actually increase Canadian output? Or would it be washed out through an equal increase in imports? Explain your reasoning.Title: Identification Things to do: Please answer the following incomplete sentences. 1. The state that an competitive markets free of transportation costs and barriers to tariffs), trade (such as identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency. 2. To express the theory in symbols, let P$ be price goods and PY the U.S. dollar of a basket of particular the price of goods be the same basket of in Japanese yen. 3. The Economist publishes its own version of the PPP theorem, which it refers to as the " 4. theory predicts that changes in relative prices will result in a change in exchange rates. 5. The growth rate of a country's money supply determines its likely future rate. 6. An in the money supply makes it easier for banks to borrow from the government and for individuals and companies to borrow from banks. 7. policy determines whether of growth in a the rate country's money supply is rate of growth…
- 2. Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras in Thailand and Japan is described by the following functions: Qd" = 60 – P; Qs™ =-5 + 1/4 P; =-10+ 1/2 P. Qd'= 80 – P; Qs' P is the price measured in a common currency used in both a. Compute the equilibrium price (P) and b. Now assume that free trade countries, such as the Thai Baht. quantities (Q) in each country without trade. occurs. The free trade price goes to 56.36 Baht. Who exports and imports cameras and in what quantities?Q4. Suppose that Brazil initially has a higher capital rental rate (r) than the United States. What would be the direction of foreign direct investment (FDI)? Use a world-capital-market graph to show the effects of FDI on the two countries’ rental rates of capital, GDP, and return to labor owners. Identify the net change in world output in the above graph. Discussion: what other effects could FDI cause in the recipient and source countries that are not captured in the model? Your answerThe following table shows the price, in Canadian dollars, of utops, the currency used in the hypothetical economy of Utopia. Assume that a system of flexible exchange rates is in place. Price of utopsQuantity of utops (in $ Canadian)supplied $1650 2700 3750 4800 Quantity of utops demanded 800 700 600 500 Refer to the information above to answer this question. What is the equilibrium exchange rate?
- a) Compute the ratio of exports to imports for the total and for eachcategory of goods listed in the table. Add the ratios to the table (you can edit thetable by clicking on it. If by any chance this does not work for you, make yourown table and insert it here)1.) Draw two graphs representing the foreign exchange market. Graph 1.1 that shows an official (fixed) exchange rate (label as eo) that is below the equilibrium exchange rate (label as ee) and Graph 1.2 that shows an official exchange rate that is above the equilibrium exchange rate. For both graphs, a.) indicate if there is a shortage or a surplus. b.) explain how the Central Bank will intervene using its international reserves to maintain the fixed exchange rate; c.) describe how this intervention will be recorded in the BOPSuppose Qd=-44*P+869, Qs=35*P+17 for home and Qd*=-44*P+123, Qs*=35*P+39 for foreign. Further suppose that the importing country place a tariff of 0.17 on the product. What is the trade volume to two decimal places? The CORRECT ANSWER is 377.29 can you show how this is done?
- Our balance trade has, in most cases been unfavorable. What could be the causes of this situation?Ab 44 Economics The following graph shows the market for euros, which is initially in equilibrium. Suppose an economic expansion in the United States leads to an increase in the incomes of American households, causing imports from Europe to rise. On the graph, illustrate the effect of an economic expansion on the market for euros by shifting the appropriate curve or curves.Ahead of the enlargement of the EU in early 2000s with 12 new members, there was a huge debate regarding the social protection of workers. What do we mean by social dumping and what are its possible effects on the EU labour market? Looking at the table above, could you conclude that social protection of EU workers decreased due to the integration of 12 new member States? Explain your answer Despite the possible consequences of social dumping on the integration process, the EU did not centralise the decisions regarding social protection in the labour market. What would be the reasoning behind such a decision?
