What is the difference between transaction demand, speculative demand, and autonomous transactions by central banks? Which of these factors determines the longterm quarterly trends in exchange rates?

Assume that Canada and the United States frequently trade with each other. Under the freely floating exchange rate system, low inflation in the U.S. will place ____ pressure on Canadian dollars (versus U.S. dollars), ____ the amount of Canadian dollars available for sale, and result in ____ inflation in Canada. a) upward; reduce; unchanged b) upward; increase; lower c) downward; reduce; lower d) downward; increase; unchanged e) None of the above

An exchange rate is the domestic price to purchase one unit of a foreign currency. For example, how much does it cost in Canadian dollars to buy one US dollar? There are various economic theories to predict exchange rates. The simplest theory is known as the Law of One Price or also known as Absolute Purchasing Power Parity (PPP). Use absolute PPP and the price of a Big Mac in different countries to complete the table below and to predict whether the local currency is over or undervalued compared to the US dollar. Country USA Canada Saudi Arabia Brazil Italy Source: The Economist Big Mac Price in Local Currency $4.62 $5.54 SR 10 R$ 12 €3.75 Current Market Exchange Rate e 1.10 3.75 2.27 0.74 Exchange Rate Predicted by PPP and Big Mac ê According to the table above, an arbitrageur in Brazil could make money by If the Big Mac Index were accurate for other tradeable goods and services, Brazil's AD curve would O Local Currency should... the US. 수 + 8°C. Clou

what is the long run effects of a permanent increase in aggregate real money demand on exchange rate, interest rate and price level

Suppose that a country experiences inflation while the nominal exchange rate and the price level in its trading partner remain unchanged.  What will happen to the country's real exchange rate and to net exports?

Assuming market-determined exchange rates, use supply and demand schedules for pounds to analyze the effect on the exchange rate (dollars per pound) between the 4U.S. dollar and the UK pound under each of the following circumstances: Impact on the exchange rate for pounds ($s per Impact on the supply curve for pounds Impact on the demand for pounds pound) (a) Voter polls suggest that the UK's conservative government will be replaced by radicals 7 who pledge to nationalize all foreign-owned assets. Select one Select one Select one (b) Both the UK and U.S. economies slide into recession, but the UK recession is less Select one Select one Select one 8 severe than the U.S. recession (c) The Federal Reserve adops a tight monetary policy that dramatically increases U.S. Select one Select one Select one 9 interest rates. (d) Britain's oil production in the North Sea decreases, and exports to the United States 10 fall. Select one Select one Select one 11 (e) The United States unilaterally…

Which government institution can create the most money? What tools does the Fed have to regulate money creation in the economy? What is the long-run impact of a larger money supply on inflation? What can be the impact of that money creation on the exchange rate? Support your answer using the Quantitative Theory of Money formula MV = P Q; to analyze the effect of money creation on the exchange rate use the Purchasing Power Parity Model, Exchange Rate of Currency X to Y = Cost of good in currency X/Cost of good in currency Y

Explain how Volkswagen’s failure to fully protect itself against foreign exchange fluctuations had a negative effect on the company. What can Volkswagen and other companies learn from this experience?

Assume in a given month, Japan's export to the U.S. increased. How such an increase will affect the Japanese Yen? From a U.S. perspective, how this increase will affect the U.S. dollar? Knowing that both currencies can float, verbally explain your answers using the demand/supply model (no need to draw a graph).

How does the exchange rate fluctuations pose a risk to manufacturing companies that rely upon an export strategy to compete in foreign markets.