An increase in productivity in a country will cause its currency to ________ because it can produce goods at a ________ price, everything else held constant. Question 32 options: a) appreciate; lower b) depreciate; higher c) appreciate; higher d) depreciate; lower
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- PRICE (Peso per dollar) 9. Study Questions and Problems #9 The following graph depicts the supply and demand curves for U.S. dollars in the foreign exchange market. Suppose that inflation rates increase in the United States. On the graph, shift either the supply of dollars curve, the demand for dollars curve, or both curves to best reflect the given scenario. ? QUANTITY OF DOLLARS (Millions per day) D If inflation rates increase in the United States, the U.S. dollar ŏ S D SPRICE (Yen per dollar) 9. Study Questions and Problems #9 The following graph depicts the supply and demand curves for U.S. dollars in the foreign exchange market. Suppose that real interest rates in the United States rise. On the graph, shift either the supply of dollars curve, the demand for dollars curve, or both curves to best reflect the given scenario. D QUANTITY OF DOLLARS (Millions per day) S D If real interest rates in the United States rise, the U.S. dollar S ?PRICE (Rubles per won) 6. Changes in the foreign-exchange market The following questions focus on the exchange rate between the Russian ruble and the South Korean won. Assume the exchange rate is flexible. The exchange rate is defined as the number of rubles you must pay for one won. Suppose a recession in Russia causes Russian incomes to decrease, while incomes in South Korea remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for South Korean won if all other things remain equal. Note: Select and drag 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. QUANTITY OF WON Supply of Won Demand for Won Demand for Won Supply of Won ? The decrease in Russian incomes causes the South Korean won to relative to the South Korean won. relative to the Russian ruble and causes the Russian ruble to…
- Assume that the total value of investment transactions between the United States and Mexico is minimal. Also, assume that the total dollar value of trade transactions between these two countries is very large. Now assume that Mexico's inflation has suddenly increased, and Mexican interest rates have suddenly increased. a) Please draw a graph to show how the equilibrium value of Mexican Pesos will change. b) What's more important for Mexican Pesos given the circumstances, change in interest rates, or change in inflation in Mexico?A semiconductor is a key component in your laptop, cell phone, and iPod. The table provides information about the market for semiconductors in the United States. Producers of semiconductors can get $18 a unit on the world market. Price Quantity Quantity (dollars per unit) demanded supplied (billions of units per year) 10 25 0 12 20 20 14 15 40 16 10 60 18 5 80 20 0 100 Due to loss of competitiveness brought on by appreciation of the exchange rate and the high production costs, U.S. government reduce the export (or limit the supply of domestic producers) by imposing an export quota of 20 billion units per year. What happens to U.S. price of semiconductors, the quantity of semiconductors bought by U.S. people, and the quantity of semiconductors exported? [hint: use…Japan and the United States are major trading partners and the exchange rate between the Japanese yen and the United States dollar is determined in a flexible foreign exchange market.(a) Assume real income increased in the United States. Draw a correctly labeled graph of the foreign exchange market for the yen, and show the effect of the increased real income in the United States on the equilibrium exchange rate for the yen.(b) Will each of the following increase, decrease, or stay the same as a result of the increase in the United States real income?(i) Japan's net exports. Explain.(ii) Unemployment in Japan. Explain.(iii) Japan's long-run aggregate supply(c) Assume instead household savings increased in the United States. Draw a correctly labeled graph of the loanable funds market in the United States, and show the effect of the increase in household savings on the equilibrium real interest rate.(d) Based on the change in the equilibrium real interest rate identified in part (c),…
- There is trade between the U.S. (domestic country) and Great Britain (foreign country) and the quantity of pounds supplied is positively related to the exchange rate. The exchange rate is defined as the domestic currency price of the foreign currency, i.e., dollars per pound. Using clearly labeled graphs of demand for and supply of the foreign currency, show and explain what will happen to: (i) the demand for pounds and/or; (ii) the supply of pounds; and (iii) the value of the dollar against the pound as a result of each one of the following changes. (a) a decrease in tariffs in the Great Britain. (b) a decrease in prices of goods produced in China. Both the U.S. and Great Britain trade with China. (c) a decrease in interest rates in the U.SQuestion 2 (a) If consumption goods in poor countries are much cheaper than the same consumption goods in richer countries. Why do richer countries not simply import these cheaper consumption goods? Give two natural economic (i.e., non-trade policy) reasons for your answer. (b) Show formally and explain how the real exchange rate between the U.S. and China is affected by an import tariff on Chinese goods in the U.S. and an export subsidy on Chinese goods in China. 3 (c) Consider the endowment version of the traded-non-traded (TNT) model. Suppose the endowment of tradables increases in period 1. Analyze the effect of this innovation on the real exchange rate depending on whether the change in the tradable endowment is temporary or permanent.Mexico and the United States are trade partners. Each country has a zero current account balance and is operating in long-run equilibrium. Assume that the inflation rate in the United States is slowing relative to Mexico's inflation rate. (a) How will the inflation rate change in the United States affect: (i) Mexico's demand for U.S. goods and services? (ii) net exports of Mexico? Explain. (b) Illustrate the impact of the change you identified in part (a) on a fully labeled AD–AS model for the economy of Mexico. Use arrows to indicate any changes in AD, real GDP, and price level. (c) Ceteris paribus, will the national income of the United States increase, decrease, or remain the same? (d) On side-by-side and fully labeled foreign exchange market graphs, illustrate the impact of the change in relative inflation on the supply of Mexican pesos and on demand for U.S. dollars. Use arrows to indicate the change in the equilibrium exchange rate for each currency.…
- A9. If the Canadian dollar loses value, and it costs Canadian supermarkets more to import bananas from Central America, will the stores pass on the higher prices to consumers immediately? If they allow the price of bananas to rise gradually over a period of time to reflect the higher costs, what will happen to banana imports? Why?Suppose a country has an overall balance of trade so that exports of goods and services equal imports of goods and services. Does that imply that the country has balanced trade with each of its trading partners?Question 2 You have the following table. USD/Euro Yen/USD Yen/Euro Euro/Yen International Economics: Problem Set 4 Table 1: Exchange Rates 12/31/2015 12/31/2016 percent change (%) 1.08.59 1.0552 116.78 -2.8271 -2.9018 (a) Fill in the blanks. You need to show the formula you use. (b) Determine whether the dollar has depreciated or appreciated against the euro over a year. (e) Determine whether the yen has depreciated or appreciated against the euro over a year.
