Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 30, Problem 30.2.16PA
Subpart (a):
To determine
Shortage or surplus of baht in the foreign exchange market and amount of baht required to buy or sell to maintain the pegged exchange rate.
Subpart (b):
To determine
Shortage or surplus of baht in the foreign exchange market and amount of baht required to buy or sell to maintain the pegged exchange rate.
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Students have asked these similar questions
Using the concept of "carry trade," explain how a decrease in U.S. interest rates could affect the EUR/USD exchange rate. Given this change in exchange rate, how would firms and customers be affected?
professors note
Supply and demand for currencies can be tricky, not least due to the confusing idea that what we are buying or selling is money itself!
Once you can wrap your mind around the idea that money is what is being obtained for other money, the next set of questions relates to what would or could make the price of one money change in terms of another.
To this effect, I'd recommend a primer from Investopedia: Six Factors That Influence Exchange Rates.
For your consideration in responding to this post, I suggest reading on how the Carry Trade has the capacity to magnify systemic risk.
Question
Draw a graph with the exchange rate (RM/$) on the Y-axis and the quantity of US
dollars on the X-axis, and explain how a large increase in the number of Malaysian workers in the United States can influence the exchange rate under a flexible exchange rate system.
a. In September 1995, Patrick Buchanan, a Republican
candidate for president, proposed a 10 percent tariff on
Japanese imports to the United States, a 20 percent
tariff on Chinese imports to the United States, and an
unspecified "social" tariff on imports from developing
countries. Use the long-run model of a small open
economy to graphically illustrate the impact of these
trade policies on the U.S. exchange rate and the trade
balance. Assume that the country starts from a position
of trade balance. Be sure to label: i. the axes; ii. the
curves; iii. the initial equilibrium values; iv. the direction
the curves shift; and v. the new longrun equilibrium
values. b. Based on your graphical analysis, explain the
predicted impact of Mr. Buchanan's proposed policies.
Specifically state what happens to the exchange rate,
the trade balance, the volume of imports, and the
volume of exports. Please show the graph while
describing each piece.
Chapter 30 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 30.A - Prob. 1RQCh. 30.A - Prob. 2RQCh. 30.A - Prob. 3RQCh. 30.A - Prob. 4RQCh. 30.A - Prob. 5RQCh. 30.A - Prob. 6RQCh. 30.A - Prob. 7PACh. 30.A - Prob. 8PACh. 30.A - Prob. 9PACh. 30.A - Prob. 10PA
Ch. 30.A - Prob. 11PACh. 30.A - Prob. 12PACh. 30.A - Prob. 13PACh. 30.A - Prob. 14PACh. 30.A - Prob. 15PACh. 30.A - Prob. 1RDECh. 30 - Prob. 30.1.1RQCh. 30 - Prob. 30.1.2RQCh. 30 - Prob. 30.1.3PACh. 30 - Prob. 30.1.4PACh. 30 - Prob. 30.1.5PACh. 30 - Prob. 30.1.6PACh. 30 - Prob. 30.2.1RQCh. 30 - Prob. 30.2.2RQCh. 30 - Prob. 30.2.3RQCh. 30 - Prob. 30.2.4RQCh. 30 - Prob. 30.2.5PACh. 30 - Prob. 30.2.6PACh. 30 - Prob. 30.2.7PACh. 30 - Prob. 30.2.8PACh. 30 - Prob. 30.2.9PACh. 30 - Prob. 30.2.10PACh. 30 - Prob. 30.2.11PACh. 30 - Prob. 30.2.12PACh. 30 - Prob. 30.2.13PACh. 30 - Prob. 30.2.14PACh. 30 - Prob. 30.2.15PACh. 30 - Prob. 30.2.16PACh. 30 - Prob. 30.2.17PACh. 30 - Prob. 30.2.18PACh. 30 - Prob. 30.2.19PACh. 30 - Prob. 30.2.20PACh. 30 - Prob. 30.3.1RQCh. 30 - Prob. 30.3.2RQCh. 30 - Prob. 30.3.3PACh. 30 - Prob. 30.3.4PACh. 30 - Prob. 30.3.5PACh. 30 - Prob. 30.2RDE
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Similar questions
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- Imagine the following scenario: The central bank of Neverland ensures that the exchange rate between the Neverland dollar and the U.S. dollar is fixed. Due to a global financial crisis the demand for U.S. dollars goes up and the demand for Neverland dollars goes down. First, the Neverland's central bank spends U.S. dollar reserves to support the peg but then it runs out of reserves. What is most likely to happen next? A. the Neverland dollar's exchange rate with respect to U.S. dollar (i.e., the price of Neverland dollars in U.S. dollars) will go up B. the Neverland dollar's exchange rate with respect to U.S. dollar will go down OC. the Neverland dollar's exchange rate with respect to U.S. dollar will not change OD. the stock market index of the Neverland stock exchange will go uparrow_forwardA country utilizes a fixed exchange rate. If the central bank were to increase the money supply, what impacts would it have on the economy? Use a diagram to explain your answer.arrow_forward
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