ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- If the U.S. Dollar appreciates, foreigners will find American goods more expensive because they have to spend less for those goods in USD, meaning with higher prices, the number of U.S. goods being exported will likely drop and leads to a reduction in the Gross Domestic Product (GDP). True or Falsearrow_forwardYou work for the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce. Your supervisor gives you the following U.S. International Transactions Accounts for the Year 20XX (figures are in billions of dollars) and wants it reported in a coherent fashion in accordance with accepted conventions: Investment income payments $24; Export of goods $456; Balance of services $57; U.S purchases of foreign assets were $147.; Imports of goods $589; Change in Official Reserves $15; Investment income receipts $28; Foreign purchases of U.S. assets were $230; Net unliteral transfers were ($32). ($32) means -$32. a)- He wants you to compute the balances of trade, current account, capital account and statistical discrepancy. b)- He also wants you to find out (based on your calculation) if the U.S. is a net debtor or a net creditor. Explainarrow_forwardThis question relates to the following news article New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall. ...a weak Kiwi dollar means importing is more expensive. "While we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low. the slower it will take for those inflation rates to fall." ASB senior economist Mark Smith said. Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c, a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly…arrow_forward
- Suppose the foreign exchange market is characterized by the following equations: Qd = 12.5 – 1.25R Qs = 3.5 + 1.25R where Qd is the demand function for foreign exchange, Qs is supply function of foreign exchange, and R is exchange rate in units of domestic currency per unit of foreign currency (quantity is in million units of foreign currency). ===================== The foreign exchange market described above is Select one: stable unstable unpredictable none of the abovearrow_forwardU S foreign exchange intervention is sometimes done by an Excha U.S. foreign exchange intervention is sometimes done by an Exchange Stabilization Fund, or ESF (a branch of the Treasury Department), which manages a portfolio of U.S. government and foreign currency bonds. An ESF intervention to support the yen, for example, would take the form of a portfolio shift out of dollar and into yen assets. Show that ESF interventions are automatically sterilized and thus do not alter money supplies. How do ESF operations affect the foreign exchange risk premium? U S foreign exchange intervention is sometimes done by an Exchaarrow_forwardThe third box is the same as the first box(increase or decrease). The fourth box is the same as the second box(demand or supply).arrow_forward
- 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.Sarrow_forwardThe financial account balance of the Canadian balance of payments decreases in all of the following cases except one. Which? Please choose an answer: at. Decrease in international reserves held by the Bank of Canada; b. Increase in Canadian direct investment in Mexico. vs. Increase in foreign bonds held by Canadians; d. Decrease in American direct investment in Canada; e. Decrease in Canadian bonds held by non-residents of Canada;arrow_forwardD3) . If the actual exchange rate for the euro value of the British pound is less than the exchange rate that would satisfy absolute PPP, which of the currencies is overvalued and which is undervalued? Why?arrow_forward
- Assume that in 2010, Country A had an exchange rate of 0.770.77 units of national currency (UNC) per U.S. dollar (USD). By 2015, Country A's budget deficit increased, and Country A decided to issue bonds to finance the deficit. As a result, the exchange rate changed by UNC0.06UNC0.06. Calculate the 2015 exchange rate.arrow_forwardHow will the following event affect variables 1 through 3 in the foreign exchange market under a flexible exchange rate system; other things unchanged. Event: The U.S. Central Bank (the Fed) starts buying Chinese currency using dollar reserves: Variable 1: Supply of dollar in the foreign exchange market ___(increase, decrease, unaffected: briefly explain why). Variable 2: Value of dollar in the foreign exchange market unaffected: briefly explain why). Variable 3: American goods exported to China unaffected: briefly explain why). (appreciate, depreciate, (increae, decrease,arrow_forwardRelative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates. If companies borrow from countries with low interest rates, the potential gains from the interest savings will likely be (multiplied or offset) by the losses from currency appreciation.arrow_forward
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