Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 34, Problem 9SPPA
To determine
Whether the British pound appreciated or
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Topics 6.2-6.5
New Currency Problems.
Each of the determinants is used once.
1. Residents and businesses of the US are asked to boycott goods made in Iran due to political
tensions between the two countries. Besides oil, the US receives plastics, iron, fruits and
vegetables, salt, and copper from Iran. Graph the Dollar and Iranian Rial markets as a result
of the boycott.
What happens to future US exports to Iran after the currency values change?
2. Assume that the US does go into a mild recession. Assume that the Euro zone avoids a
similar recession and continues its growth rate. Graph the Dollar and Euro markets. From
the US perspective.
1. The principal function of the foreign exchange
market is the transfer of funds, thus purchasing power,
from one nation and currency to another.
2. If it takes 116.57 yen to buy one dollar, it takes
$.0085785 to buy one yen.
3. Purchasing-power parity theory postulates that the
change in the exchange rate between two currencies is
proportional to the change in the ratio in the two
countries' general price levels.
4. The price-specie-flow adjustment mechanism
operates by the deficit nation losing gold and
experiencing a reduction in its money supply.
5. Monetary policy is very effective under a fixed
exchange rate policy.
True or Falae
The pressures on the foreign exchange market are such that they cause the British pound to depreciate against the US dollar. If the British pound tries to maintain the exchange rate against the US dollar, which of the following pressures will stop the pressure to devalue the British pound?
a. Britain has to sell pounds to buy dollarsb. Britain will have to increase its money supply to create a domestic product
Chapter 34 Solutions
Foundations of Economics (8th Edition)
Ch. 34 - Prob. 1SPPACh. 34 - Prob. 2SPPACh. 34 - Prob. 3SPPACh. 34 - Prob. 4SPPACh. 34 - Prob. 5SPPACh. 34 - Prob. 6SPPACh. 34 - Prob. 7SPPACh. 34 - Prob. 8SPPACh. 34 - Prob. 9SPPACh. 34 - Prob. 10SPPA
Ch. 34 - Prob. 1IAPACh. 34 - Prob. 2IAPACh. 34 - Prob. 3IAPACh. 34 - Prob. 4IAPACh. 34 - Prob. 5IAPACh. 34 - Prob. 6IAPACh. 34 - Prob. 7IAPACh. 34 - Prob. 8IAPACh. 34 - Prob. 1MCQCh. 34 - Prob. 2MCQCh. 34 - Prob. 3MCQCh. 34 - Prob. 4MCQCh. 34 - Prob. 5MCQCh. 34 - Prob. 6MCQCh. 34 - Prob. 7MCQCh. 34 - Prob. 8MCQ
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- Do you think that a country experiencing hyperinflation is more or less likely to have an exchange rate equal to its purchasing power parity value when compared to a country with a low inflation rate?arrow_forwardWhy would a nation dollarize—that is, adopt another countrys currency instead of having its own?arrow_forwardUsing the following table, calculate the missing exchange rates: Country Currency Price of one unit of foreign currency in Canadian dollars Price of one Canadian dollar in terms of foreign currency U.S.A. Dollar 1.4325 Britain Pound 0.4275 France Euro 0.24 Japan Yen 118.0825 Mexico Peso 0.018arrow_forward
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