Chapter 10, Problem 9SQ

Question 1 Determine which account of the Balance-of-Payments is affected by each of the following transactions and the impact on the market for foreign exchange. (a) Your older brother who lives in London sends money to pay your tuition. (b) Some of the tuition money your older brother sends is used to buy a laptop from Amazon.com. (c) Carnival Cruise Lines pays for half of the cost of building the new cruise pier in your country. (d) Celine Dion performs at the Jamaica Jazz & Blues Festival. (e) In order to diversify its asset holdings a local asset management firm, buys shares of Ford Motor Company on the New York Stock Exchange.

1. What is the exchange rate between the U.S. and Germany? Has there been appreciation or depreciation of the U.S. dollar relative to Germany's currency? 2. As a manager, how does this affect your decision to expand into Germany? Will it affect your costs or ability to produce in Germany? 3. Would you recommend your firm expand into Germany? If so, would you produce the product/service in Germany? Would you expand to sell the product/service to a new target market? If you don’t think your firm should expand into Germany, why?

You own a local company. In the past year, you successfully expanded your sales market into Europe, and you now have profits and cash denominated in euros. You want to convert the euros to your home country currency to repatriate the profits and pay taxes. You are a. not required to convert the euros to the home currency to pay taxes. b. a demander of the euro in the foreign exchange market. c. a supplier of your home country's currency in the foreign exchange market. d. a demander of your home country's currency in the foreign exchange market.

Describe how each of the following transactions affects the U.S. Balance of Payments. (Recall that each transaction gives rise to two entries in the Balance-of-Payments Accounts.) (a)  A French consumer imports American jeans and pays with a check drawn on a U.S. bank in Philadelphia. (b)  An American company sells computer software to Costa Rica and receives a money order of $120,000. (c)  A citizen from Italy enters the United States on an immigrant visa (that is, upon entering the United States she becomes a permanent resident of the United States). Her wealth in Italy is estimated to be about 1.5 billion U.S. dollars. (d)  Frank Rogers, of Durham, buys 2,300.00 dollars of stocks from the German car maker BMW, from Citibank New York, paying with U.S. dollars. (e)  An American company sells a subsidiary in the United States and with the proceeds buys a Romanian company. (f)  The United States forgives debt of $3,200,000 to Canada. (g)  An American family travels to…

How much is the difference between the cross-exchange rates for Rupees (India) and Euro (europe)  Show any calculations. Explain the reason for that difference.

International Finance (chapter 21)  4 What factors will shift the supply and demand for currency?

EU neighbours: Lithuania changes from litas to euros - BBC News 1. Consider the benefits of participating in a single currency system. What are the advantages to Lithuania of adopting the euro? Do you see any drawbacks of being a member of the Euro Zone? Provide any other references or sources used

Describe how a change in the exchange rate affected your firm. Explain what happened to your price and quantity. How can you profit from future shifts in the exchange rate? How do you predict future changes in the exchange rate?

How would each item be counted in the US balance of payments? Give sign, category (e.g. export, FDI, income flow, etc.) and account (CA, FA or OR).