China has a fixed rate regime. They keep their currency in terms of trade, fixed against the US dollar. So, if the US begins to raise interest rates, then what must China do and what could possible happen in their own economy? they must raise their interest rates also and this could create a recession they must appreciate their currency and this could create a recession they must raise their interest rates and tis could create an expansion and create inflation they must appreciate their currency and this could create an expansion and create inflation
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- Imagine an American MNC. Why it might decide to borrow in a country such as Brazil, where interest rates are high, rather than a country like Germany, where interest rates are low? Discuss why this may be the best strategy for the firm, given your understanding of the relationship between inflation, interest rates, and exchange rate.If a country is having its currency pegged to the U.S. dollar (hard peg), and the confidence in the domestic currency falls, sparking a capital outflow. What action would its central bank take to defend its fixed rate against the dollar? Question 23 options: It would build up its international reserve (selling the domestic currency) It would dip into its international reserve (buying the domestic currency) It would raise domestic interest rates It would lower domestic interest ratesThe pressures on the foreign exchange market are such that they cause the British pound to depreciate against the US dollar. If the British pound tries to maintain the exchange rate against the US dollar, which of the following pressures will stop the pressure to devalue the British pound? a. Britain has to sell pounds to buy dollarsb. Britain will have to increase its money supply to create a domestic product c. Britain must buy pounds and sell dollarsd. Britain should do nothing as a fixed interest rate does not change
- H3. The Central Bank of the Bahamas pegs the Bahamian Dollar to the United States Dollar at a price of 1 BSD per USD. As an analyst for XYZ Consulting Inc., you have been asked to predict the behavior of key macroeconomic variables in the Bahamas for different policy scenarios. Using all the appropriate diagrams, your analysis must describe the Bahamian money and output markets, as well as the foreign exchange market. To perform this task, you must assume that prices are sticky: fixed in the short-run and flexible in the long-run. The scenarios are: a) A temporary restrictive monetary policy in the Bahamas. b) A temporary restrictive fiscal policy in the Bahamas.According to the flow of balance of payment (BOP) approach to exchange rate determination, there are financial measures being put in place by countries with managed floating exchange rate regime in order to cope with a deficit in its BOP.In order to control those countries currency volatility and opt for stabilization what will happen if they run persistent BOP deficits for a couple of years? T-Mobile., like many emerging telecom carriers, has only limited and infrequent access to domestic debt and equity markets. As a financial management at Ait, how would you be able to demonstrate to the Board of Directors and convince them as to why the Net Present Value and Internal Rate of Return capital budgeting decision rules sometimes provide different rank orderings of investment project alternatives? Equipment that costs $15,000 and generates a $5,000 annual return would appear to "pay back" on the investment in 3 years. If economists expect inflation to rise 30 percent annually, what…9 14. Assume you fully believe that any movements in the exchange rate can be predicted using the inflation rate differential between countries (i.e., you believe in the purchasing power parity). You collect some data on Chile and Paraguay and find that the two countries have the same nominal interest rate. However, the central bank of Paraguay just made an announcement suggesting a downward revise of the real interest rate with no expected change in the nominal interest rate. Based on this information, what do you think will be the effect on the Paraguayan guaraní (the Paraguayan currency)? Will it appreciate, depreciate, or remain constant? Explain briefly your reasoning. Please answer Quickly and I will give the question a like
- Suppose the exchange rate for Japanese yen, S0, is currently Yen160 = $1. If the interest rate in the United States is RUS = 10% and the interest rate in Japan is Rj = 7%, then what must the forward rate be to prevent covered interest arbitrate?Assume that a country, due to speculation in the foreign exchange market, faces a sudden capital outflow (see figure below). If the country has high levels of foreign denominated debt and inadequate foreign reserves answer the following questions, [Questions 17,18,19] e-Exchange Rate Short Run NX NCO, NY, A shift in the NCD curve dae to a sudden capital outflow NCO before NCO her Long Ran NX NX, NCO Question 17: In a free float foreign exchange rate regime the country will experience immediately. a. an increase in NX due to currency devaluation at NX b. business bankruptcies due to currency devaluation e a devaluation of its currency from e to e d. a devaluation of its currency from esto es with no change in NX e all of the aboveIn the current pandemic situation, State Bank of Pakistan lower the interest rate (KIBOR) from13.75% to 7%. How this change could help to revive the economy? What other monetarypolicy measures could be taken by state bank of Pakistan in this situation?
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