Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 19, Problem 5CQ
(a)
To determine
Impact of increased purchase from Country U by Country M’s company.
(b)
To determine
Impact of increased purchase from Country M by Country U.
(c)
To determine
Impact of higher real interest rate in Country M on Country U’s dollar.
(d)
To determine
Impact of lower real interest rate in Country U and borrowing of dollar from Country U by Country M.
(e)
To determine
Impact of inflation in Country U and stable price in Country M.
(f)
To determine
Impact of same increase in the inflation rate in Country M and in Country U on Country U’s dollar.
(g)
To determine
Impact of economic boom in Country M on Country U’s dollar.
(h)
To determine
Impact of attractive investment opportunities in Country M on Country U’s dollar.
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Students have asked these similar questions
Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 0.75 eurosper U.S. dollar and today the U.S. dollar is trading at 0.80 euros per U.S. dollar. Which of the twocurrencies (the U.S. dollar or the euro) has appreciated and which has depreciated today?b) Suppose that the exchange rate for the Mexican peso fell from 15 pesos per U.S. dollar to 10 pesosper U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan tobuy in the foreign exchange market?c) Suppose that the exchange rate rose from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What isthe effect of this change on the quantity of U.S. dollars that people plan to sell in the foreignexchange market?
Assume that in the United States
$1,000 wíll buy the same basket of goods that
20,000 pesos will buy in Mexico. The U.S.
dollar/Mexican Peso exchange rate is $0.04
per peso.
(a) Is the U.S. dollar overvalued or
undervalued? Please explain.
(b) Is the Mexican Peso overvalued or
undervalued? Please explain.
Consider the Purchasing Power Parity theory
in your answer.
(Only accept typing answers)
(Only accept typing answers)
(Only accept typing answers)
If the exchange rate between the US Dollar ($) and the Euro (E) goes from being $5/E to $6/E, we say that the US Dollar has __________ relative to the Euro.
a) depreciated
b) stagnated
c) appreciated
d) arbitraged
Chapter 19 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
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