Solve all this question......you will not solve all questions then I will give you down?? upvote.... 4. Exchange-rate overshootingThe following graph shows the short-run supply schedule (So) and demand schedule (Do) for the Mexican peso. S₁ denotes the long-run supplyschedule of pesos. The initial equilibrium exchange rate is $1.20 per peso.Suppose that the demand for pesos increases to D₁.On the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicatethe long-run equilibrium exchange rate.Note: Dashed drop lines will automatically extend to both axes.EXCHANGE RATE (Dollars per peso)3.02.7242.11.80.90.60.300 25 50Step1.2.3.0°$0S₂75 100 125 150 175 200 225 250QUANTITY (Pesos)Short-Run EquilibriumReferring to the previous graph, use the dropdown menus in the following table to show the order of the events that led to the long-run equilibriumexchange rate.EventLong-Run Equilibrium ReferringexchangeStep1.2.3.5.The Mexican price of U.S. exports decreases, and the quantity of U.S. exports demanded increases.The quantity of pesos supplied increases.The dollar depreciates to $2.10 per peso.The supply schedule of pesos becomes more elastic, as shown by S₁.The dollar appreciates to $1.50 per peso.that led to the long

Exchange rate overshooting implies a theory introduced by economist Rudi Dornbusch. It advises that…

Exchange-rate overshooting e following graph shows the short-run supply schedule (Sp) and demand schedule (Do) for the Mexican peso. S₁ denotes the long-run supply hedule of pesos. The initial equilibrium exchange rate is $1.20 per peso. uppose that the demand for pesos increases to D₁. the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate e long-run equilibrium exchange rate. ote: Dashed drop lines will automatically extend to both axes. 3.0 2.7 24 2.1 1.8 1.5 1.2 0.9 0.6 03 0 0 25 50 50 o 75 100 125 150 175 200 225 250 QUANTITY (Pesos) Short-Run Equilibrium Long-Run Equilibrium ?

Exchange-rate overshooting e following graph shows the short-run supply schedule (Sp) and demand schedule (Do) for the Mexican peso. S₁ denotes the long-run supply hedule of pesos. The initial equilibrium exchange rate is $1.20 per peso. uppose that the demand for pesos increases to D₁. the graph, use the tan point (dash symbol) to indicate the short-run equilibrium exchange rate. Then use the grey point (star symbol) to indicate e long-run equilibrium exchange rate. ote: Dashed drop lines will automatically extend to both axes. 3.0 2.7 24 2.1 1.8 1.5 1.2 0.9 0.6 03 0 0 25 50 50 o 75 100 125 150 175 200 225 250 QUANTITY (Pesos) Short-Run Equilibrium Long-Run Equilibrium ?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter11: Foreign Exchange, Trade, And Bubbles

Section: Chapter Questions

Problem 6MC

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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.…
Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 0.75 eurosper U.S. dollar and today the U.S. dollar is trading at 0.80 euros per U.S. dollar. Which of the twocurrencies (the U.S. dollar or the euro) has appreciated and which has depreciated today?b) Suppose that the exchange rate for the Mexican peso fell from 15 pesos per U.S. dollar to 10 pesosper U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan tobuy in the foreign exchange market?c) Suppose that the exchange rate rose from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What isthe effect of this change on the quantity of U.S. dollars that people plan to sell in the foreignexchange market?
10) When policy makers decide to revalue the currency, such an action generally represents A) an increase in the pegged value of the domestic currency. B) a decision to let the currency float. C) a reduction in the foreign price level. D) an increase in the domestic price level.
Explain why the U.S. demand for Mexican pesos is downward-sloping and the supply of pesos to Americans is upward-sloping. Indicate whether each of the following would cause the Mexican peso to appreciate or depreciate: Deteriorating political relations reduce American tourism in Mexico.
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?
3. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Moving up along the AD curve from point X to point Y, the quantity of output demanded falls to $300 billion, and the price level rises to 140. PRICE LEVEL 170 160 150 140 130 120 110 100 90 0 100 X 200 AD 300 400 500 600 OUTPUT (Billions of dollars) 700 800 ?
As the price level falls, the purchasing power of households' real wealth will , causing the quantity of output demanded to This phenomenon is known as the effect. Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased by domestic consumers and firms (imports) will Net exports will therefore causing the quantity of domestic output demanded to This phenomenon is known as the effect.
Explain the impact on US export and import if the US dollar has depreciated in comparison with other currencies. For example, the exchange rate for the Canadian dollar was 1.36 per U.S dollar in 2003. Now in 2020, it is 1.31 Canadian dollars per U.S.dollar under this case the dollar has suffered a slight depreciation. Also, when the dollar has depreciated in the case of the Chinese Yuan from 8.27 in 2003 to 6.69 yuans in 2020 per U.S dollar. Also, when there is not either appreciation or depreciation from 2003 to 2020 which is the case of Saudi Arabia currency its exchange rate remains the same 3.75 Riyals per dollar since 2003. Then explain the impact of U.S. exports and imports under these scenarios.
Assume that in the United States $1,000 wíll buy the same basket of goods that 20,000 pesos will buy in Mexico. The U.S. dollar/Mexican Peso exchange rate is $0.04 per peso. (a) Is the U.S. dollar overvalued or undervalued? Please explain. (b) Is the Mexican Peso overvalued or undervalued? Please explain. Consider the Purchasing Power Parity theory in your answer. (Only accept typing answers) (Only accept typing answers) (Only accept typing answers)
Explain why the U.S. demand for Mexican pesos is downward-sloping and the supply of pesos to Americans is upward-sloping. Indicate whether each of the following would cause the Mexican peso to appreciate or depreciate: The United States engages in a high-interest-rate monetary policy.
15) When the nominal exchange rate in terms of dollars per yen rises, A) the dollar buys more yen and the dollar has depreciated. B) the dollar buys fewer yen and the dollar has depreciated. C) the dollar buys more yen and the dollar has appreciated. D) the dollar buys fewer yen and the dollar has appreciated.