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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Chapter 9, Problem 13CQ
To determine
Identify the factors that determine the exchange rate and explain how net exports be impacted if a nation’s currency appreciates in the foreign exchange market.
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Macroeconomics: Private and Public Choice (MindTap Course List)
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- (a) There are two countries in the world, Australia and Japan. Suppose that the central bank of Australia lowers the real interest rate, while the central bank of Japan raises the real interest rate. In this case, the nominal exchange rate (Yen/Dollar) increases. Answer true or false. Please briefly explain your answer. (b) Argentina is an open economy. Suppose that Argentina fixes the value of their currency to US dollars. If Argentina experiences hyperinflation, it can stabilize inflation by using its monetary policy freely. Answer true or false. Please briefly explain your answer.arrow_forwardA rise in interest rates tends to contract the economy by appreciating the currency and reducing net exports. True Falsearrow_forwardHi There! The difference between the slopes of the IS and RX curves depends only on the sensitivity of net exports to the real exchange rate. Is this true or false? I've found little on the topic.arrow_forward
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