Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 20, Problem 4E
a)
To determine
The graph of the exchange rate over time.
b)
To determine
Explain the appreciation or depreciation period according to the graph.
(c)
To determine
Discuss the statement using the tools used in the chapter.
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Students have asked these similar questions
View the data below for the exchange rate between the US dollar and the Japanese yen.
How many yen could you get per dollar at the earliest date shown on the chart? Explain.
How many yen could you get per dollar at the most recent date shown on the chart? Explain.
Has the dollar appreciated or depreciated in value over time? Explain.
The following figure shows the Current Account Balance (similar to the Trade Balance) of Japan
(black line) and China (red line). During their growth periods (1980s for Japan and 2000s for
China), were these countries net savers or borrowers? What are some ways that the
governments intervened in the foreign exchange market to keep their BOP from adjusting
towards 0?
12.5
10.0
7.5
5.0
2.5
0.0
-5.0
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Source: Organization for Economic Co-operation and Development
fred.stlouisfed.org
US $, Sum Over Component Sub-periods/10000000O000
The graph represents a foreign exchange market and shows the supply and demand for Median Earth's currency, the shilling. The price of a shilling is stated in terms of Normandy's currency, the doubloon. The horizontal axis shows the quantity of shillings that are desired and offered for exchange. The exchange rate in doubloons per shilling is measured on the vertical axis. Answer the questions based on the graph.
Chapter 20 Solutions
Macroeconomics (Fourth Edition)
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- At the start of 1996, the annual interest rate was 8 percent in the United States and 4.8 percent in Japan. The exchange rate was 110 yen per dollar at the time. Mr. Jorus, who is the manager of a Bermuda-based hedge fund, thought that the substantial interest advantage associated with investing in the United States relative to investing in Japan was not likely to be offset by the decline of the dollar against the yen. He thus concluded that it might be a good idea to borrow in Japan and invest in the United States. At the start of 1996, in fact, he borrowed ¥1,000 million for one year and invested in the United States. At the end of 1996, the exchange rate became 120 yen per dollar. How much profit did Mr. Jorus make in dollar terms?arrow_forwardIn the picture below is the table to answer this question. The highlighted one is my guess which is wrong. Based on the Exchange rates above, How might international travel be affected by the exchange rates above? A)More Americans can afford to travel to Canada.B)More Canadians will be able to afford travel in the US. C)More Americans can afford to travel to Great Britain.D)Mexico is an expensive place for Americans to travel.arrow_forwardDescribe 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?arrow_forward
- Find US net export (current account balance) and its relation with US savings and investment. Draw a figure to show it.arrow_forwardThe following paragraphs discuss the impact of various economic events on the exchange rate. Complete the paragraphs by filling in the blanks. Use any of the words from the following list (you can use each of these words as many times as you wish but choose carefully - your sentence must make grammatical sense):demand supply left right buy sell imports exports rise fall increases decreases What happens to the current account balance and the exchange rate when the following happens? Suppose that New Zealand firms become more profitable relative to foreign firms and so increase their payment of dividends (everything else held constant). The value for net foreign income therefore ________ and the value of the current account balance will _______. Payment of NZ dividends to foreign owners affects the _______ or/of $NZ while payments of foreign dividends to NZ owners of foreign companies affects the _______ for/of $NZ. Therefore the impact of the change in profit of NZ firms is…arrow_forwardWhat is the current (within the last 48 hours) exchange rate between the U.S. dollar and the Chinese Yuan?arrow_forward
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