oney supply is growing at a rate of 4 percent, and real US GDP is growing by 2.5 percent.  The euro area’s money supply is expanding by 6 percent, and real GDP in the euro area is rising 3.5 percent.  The dollar/euro spot exchange rate is 1.10.  Using the simple model of the monetary approach to predict the US dollar/euro exchange rate, Does the dollar appreciate or depreciate?

In an open economy that is on a flexible exchange rate, show the short run effects on output and interest rates of a decrease in money supply. To answer this question, draw the following four diagrams: 1. The goods market, 2. The money market 3. The IS-LM curves, and 4. The interest parity condition. Clearly label the initial and new equilibrium points in each diagram. Provide brief explanations for the changes. What is the effect on net exports?

Country Z exports $5 million of goods and services and imports $5 million of goods and services. It also has $10 million of foreign currency denominated foreign assets and $5 million of local currency denominated foreign liabilities both of which earn a fixed 5% return in their respective currencies.If the price elasticity of exports is 0.5 and the elasticity of imports is (-)0.4 what will happen to the current account if the exchange rate depreciates by 1%?   Question 1Select one: a. it is unchanged b. improves by $0.005 million c.   improves by $0.045 million   d.   improves by $0.055 million   e.   worsens by $0.005 million

If you are traveling in China and you purchase a meal that costs 140 yuan and the current exchange rate is 7 yuan to the dollar, then the price of the meal in U.S. currency is Group of answer choices $2 $200. $10. $20.

Trinidad and Kenya are trading partners.  The Kenyan economy is operating at full employment, and Kenya's current account balance is zero. A.  Assume the exchange rate between the Trinidadian dollar (TD) and the Kenyan shilling (KS) changes from 1TD=82KS to 1TD=65KS.  Does the KS appreciate or depreciate against the TD? B.  Given your answer in Part A, will each of the following increase, decrease, or remain the same?      i.  The price of Kenyan goods in Trinidadian dollars      ii.  Kenya's net exports. C.  Draw a single correctly labeled graph with the long run Phillips curve for Kenya.  On the graph, show the new short run equilibrium as a result of the change in Kenya's net exports from Part Bii, labeled point X. D.  Given your answer in Part Bii, will each of the following be in deficit, surplus, or zero for Kenya?      i.  Current account balance      ii.  Financial (capital) account balance

Given the interest parity condition, the demand for domestic bonds would decrease if domestic interest rates decreased. In a market where the domestic interest rate is 3.1%, the foreign interest rate is 1.1% and the current exchange rate is 95.00, the future expected exchange rate must be decimal places.) for the interest parity condition to hold. (Round your response to two

3. Consider the following game in normal form. Player 1 is the "row" player with strate- gies a, b, c, d and Player 2 is the "column" player with strategies w, x, y, z. The game is presented in the following matrix: W x y Z 2,1 0,2 2,1 a 3,3 b 1,1 1,2 1,0 1,4 c 0,0 1,0 3,2 1,1 d 0,0 0,5 0,2 3,1 Find all the Nash equilibria in the game in pure strategies.

If the European euro were to depreciate relative to the U.S. dollar in the foreign exchange market, would it be easier or harder for the French to sell their wine in the United States? Suppose you were planning a trip to Paris. How would depreciation of the euro change the dollar cost of your trip?

Q2. The inflation rate in Japan is 1% per year, and the inflation rate in Korea is 3% per year. What can you say about the Korean won-Japanese yen exchange rate if purchasing power parity holds? Explain your answer.

Assume that there is a free-floating exchange rate. Interest rates rise in the UK, relative to those abroad. Discuss the effect that you would expect this to have on exchange rates. You should consider the effect on currency supply and demand, and illustrate your answer with a diagram. You should also consider how this relates to the concept of uncovered interest rate parity, and discuss this with the help of an equation.