Which of the following is likely to occur for the United States, if the US dollar loses strength relative to the Japanese yen, ceteris paribus? A- Aggregate demand will decrease (shift left) B- Aggregate demand will increase (shift right) C- Aggregate supply will increase (shift right) D- Aggregate supply will decrease (shift left)
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- 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.SOne of the reasons given for the downward sloping aggregate demand curve is the foreign price effect. Clearly explain, step by step, how an increase in the price level will lead to a decrease in the aggregate demand, indicating a downward sloping aggregate demand curve.Q2-8 The simple Marshall-Lerner condition would suggest that one of the following cases would produce a worsening of the trade balance if the country's currency depreciated. Which one?(The negative sign on elasticities is being ignored; also, assume that trade is initially balanced.) Select one: a. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.5 b. elasticity of demand for exports = 0.4; elasticity of demand for imports = 0.6 c. demand curve for exports is vertical; demand curve for imports is horizontal d. elasticity of demand for exports = 0.8; elasticity of demand for imports = 0.1
- A Canadian manufacturer starts exporting its products to the United States of America. Which of the following scenarios will have a negative effect on the Canadian manufacturer? Question 11 options: That weekend in Canadian dollar and increasing interest rates. A weakening Canadian dollar and the increase in the interest rates. A strong Canadian dollar with low interest rates. A strengthening of the Canadian dollar and an increase in interest rates.When American companies buy office buildings in Australia, they are generating a: A) Supply of U.S. dollars and a demand for a foreign currency. B) Supply of U.S. dollars and a supply of a foreign currency. C) Demand for U.S. dollars and a supply of a foreign currency. D) Demand for U.S. dollars and a demand for a foreign currencya)If the European Union increases tariffs on U.S. goods, this would be Group of answer choices a positive aggregate demand shock and will shift the AD curve to the left a negative aggregate demand shock and will shift the AD curve to the right a negative aggregate demand shock and will shift the AD curve to the left a positive aggregate demand shock and will shift the AD curve to the right b)As the price level rises, the exchange rate Group of answer choices falls, so exports rise and imports fall. falls, so exports fall and imports rise. rises, so exports rise and imports fall. rises, so exports fall and imports rise.
- Aggregate Demand and Aggregate Supply - End of Chapter Problem A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners, even though the U.S. aggregate price level remains the same. As a result, foreigners demand more U.S. aggregate output. Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve.Suppose Greenland wants stuffed toy beavers from Canada. This will mean the demand for the Canadian dollar will Question 45 options: increase; increase and the supply of the Danish krone, the currency used in Greenland, will decrease; decrease increase; decrease decrease; increaseSuppose Americans suddenly develop a strong taste for Canadian whiskey. What happens to the demand for Canadian dollars in the foreign exchange market? What happens to the value of Canadian dollars in the foreign exchange market? What about U.S. dollars? What happens to the quantity of net exports in Canada, other than whiskey, as a result of your answer in part b? What about the U.S.?
- "Roman Abramovitch" lecture: you must answer all questions. Displayed above is the (spot) foreign exchange market for the pound sterling and the GIG, the national currency of the country High Tech. At the initial equilibrium point X, 1 Pound 5 Gigs. Please answer the following questions: GIGS S₂ = 1 X O Z Se= DGIGS SE = DGIGS DE = SGIGS DE = SGIGS Billions of Pounds 1. Why does the supply curve for pounds slope upward? 2. Starting from an initial equilibrium of point X, consider a new, 5 billion pounds of capital inflow to High Tech. Under what situation would the new equilibrium be at point Y versus point Z? 3. Compare the (numerical) size of the monetary base or high-powered Money (Mo) at points X and Z. 4. If we knew that the money multiplier equals 2 and that the central bank of Freedonia had fully sterilized the capital inflow, could we estimate by how much real GDP would increase? 5. If the central bank decided instead not to sterilize, would the nominal or real gig exchange rate…Which of the following would definitely cause a decrease in the price level for the U.S.? a transition from peace to war and a decrease in productivity an increase in interest rates and a good supply shock involving electricity an increase in wages and an appreciation of the U.S. dollar an expectation by business owners of worse business conditions and an increase in wages an increase in the cost of oil and an increase in tax ratesIn Belarus, the government doesn’t allow trading of its ruble outside a narrow price range, which greatly overvalues the ruble – there is a price floor on the ruble compared to euros or dollars. Because of the floor, currency trading has dried up – who would want to sell foreign currencies for grossly overpriced Belarusian rubles? A friend of one of my students has a web site designed to overcome rigidities in this market, a sort of Craigslist for currency. People specify amounts they are willing to buy or sell, agree to trade at some price and arrange a meeting place. When they meet, the trade nominally occurs at the official price floor, making the transaction nominally legal; but the person selling rubles makes extra payments to the buyer to lower the price sufficiently so that the trade actually takes place at the equilibrium price. This is one more way in which technology helps markets circumvent imperfections and rigidities. Q: If the Belarusian government increases…