(1-4) Assume that consumers all around the worldonly consume Big Macs at MacDonald's. AnAmerican tourist found that 50 USD can purchase30 Big Macs in India, but the same amount ofmoney can only purchase 25 Big Macs in China.The real exchange rate between China and India isA) 1 unit of consumption goods in India = 5/6 unitof consumption goods in China B) 1 unit ofconsumption goods in China = 5/6 unit ofconsumption goods in India C) 1 unit ofconsumption goods in India = 2 unit ofconsumption goods in China D) 1 unit ofconsumption goods in India = 1/2 unit ofconsumption goods in China

The objective of the question is to determine the real exchange rate between China and India based…

Answered: (1-4) Assume that consumers all around…

ENGR.ECONOMIC ANALYSIS

14th Edition

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Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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You work for the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce. Your supervisor gives you the following U.S. International Transactions Accounts for the Year 20XX (figures are in billions of dollars) and wants it reported in a coherent fashion in accordance with accepted conventions: Investment income payments $24; Export of goods $456; Balance of services $57; U.S purchases of foreign assets were $147.; Imports of goods $589; Change in Official Reserves $15; Investment income receipts $28; Foreign purchases of U.S. assets were $230; Net unliteral transfers were ($32). ($32) means -$32. a)- He wants you to compute the balances of trade, current account, capital account and statistical discrepancy. b)- He also wants you to find out (based on your calculation) if the U.S. is a net debtor or a net creditor. Explain
3. In which country would you save if the nominal interest rate equals 4% in the U.S. and 1% in Germany, the current dollar-Euro exchange rate (E$/ €) is equal to 1.2 and your expected exchange rate one year from now (Ee$/ €) equals 1.25.
Suppose the foreign exchange market is characterized by the following equations: Qd = 12.5 – 1.25R Qs = 3.5 + 1.25R where Qd is the demand function for foreign exchange, Qs is supply function of foreign exchange, and R is exchange rate in units of domestic currency per unit of foreign currency (quantity is in million units of foreign currency). ===================== The foreign exchange market described above is Select one: stable unstable unpredictable none of the above
QUESTION 1 The price of a good is $5.56 in the USA and £4.42 in Britain and the exchange rate is £0.98. If you purchase a good from the UK, then how many goods from the US do you forgo purchasing? (Round to the nearest hundredth.) QUESTION 2 The price of oil is $5.83 in the USA and £4.73 in Britain and the exchange rate is £0.85. You have an oil budget of $39 and want to buy as much oil as possible. What is the maximum amount of oil you can afford? (Round to the nearest hundredth.)
4) Suppose the price level in India is 9,500, the price level in the United States is 140, and the price level in Brazil is 750. Suppose the current nominal exchange rates are 75 Indian rupee per dollar and 5 Brazilian real per dollar. Calculate the real exchange rates (rounded to two decimal places) between each pair of countries. Note that you will have to first calculate the nominal exchange rate between Brazil and South India before calculating the real exchange rate between those two countries. (4
I added the front page for context only. Please do D, E, and F ONLY!
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Suppose that, initially, the foreign exchange market between the United States and Canada is in equilibrium. Suppose that preferences for goods made in Canada change in the United States, causing U.S. consumers to purchase fewer goods and services made in Canada. Illustrate how this change affects the market for Canadian dollars by shifting one or both of the curves on the following graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap Into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply X Demand CANADIAN DOLLARS U.S. DOLLARS PER CANADIAN DOLLAR Demand Supply (?) This change in the market for Canadian dollars causes the U.S. dollar to disadvantage of this change in the demand for foreign currency for the United States? O U.S. inflation is lower due to lower prices on Canadian goods. O U.S. firms find it more difficult to compete with lower-priced Canadian goods. OU.S.…
D3) . If the actual exchange rate for the euro value of the British pound is less than the exchange rate that would satisfy absolute PPP, which of the currencies is overvalued and which is undervalued? Why?
17. Consider two exchange rates X/Y and Z/Y. (For example EUR/USD and JPY/USD.) They both follow perfectly correlated geometric Brownian motions with parameters (1,01) and (μ2,02). (a) The cross-exchange rate X/Z (for example EUR/JPY) follows a standard Brownian motion (b) The cross-exchange rate X/Z (for example EUR/JPY) follows a general Brownian motion (c) The cross-exchange rate X/Z (for example EUR/JPY) follows a geometric Brownian motion (d) The cross-exchange rate X/Z (for example EUR/JPY) does not follow a geometric Brownian motion
According to a survey ("Big MacCurrencies," The Economist, April 17th 1993), in 1993, the average price of a Big Mac in the U.S. was $2.28. In Japan, Big Mac fans had to fork out ¥391 for this feast. What was the PPP implied exchange rate between the $ and the ¥?
The local currency in Peru is the Peruvian Nuevo Sol (PNS). In 2020, the official exchange rate between the PNS and the USD was 3 (i.e., 3 PNS = 1USD). Table 1 gives local currency prices of three goods in Peru and the United States. Table 1 also gives the expenditure shares of each good (i.e., what fraction of total expenditures do people spend on each good). Table 1. Local Prices & Expenditure Shares in Peru and the U.S. Item Expenditure Share Prices in Local Currencies Peru U.S. Corn (1 kg) T-Shirts (1 shirt) Rent (2 bedroom apartment) 0.3 6 PNS 2 USD 0.2 45 PNS 15 USD 0.5 1,000 PNS 1,000 USD 6. Calculate and report the Purchasing Power Parity (PPP) exchange rate between the PNS and the USD. PPP Exchange Rate: 7. Peru's GDP per capita in 2020 was 18,000 PNS. Calculate and report Peru's GDP per capita in USD using the Official Versus PPP exchange rates. Peru's GDP per capita in USD using Official Exchange Rate: Peru's GDP per capita in USD using PPP Exchange Rate: 8. Use the space…

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