160-Exchange rate (yen per U.S. dollar)The graph shows the demand curve for U.S. dollars.Draw a new demand curve that shows the effect ofan increase in the U.S. interest rate differential. Label it.140-The U.S. interest rate differential rises when120-○ A. the U.S. interest rate falls and the foreign interestrate remains the same100-○ B. the gap between the U.S. interest rate and theforeign interest rate becomes smaller○ C. the U.S. interest rate falls and the foreign interestrate rises80-○ D. the U.S. interest rate rises and the foreign interestrate falls60-40-1.31.41.51.6D1.7⑤1.8Quantity (trillions of U.S. dollars per day)>>> Draw only the objects specified in the question.

The U.S. interest rate differential refers to the difference in interest rates between the United…

Answered: 160- Exchange rate (yen per U.S.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The current exchange rate is $1.00 = 1.50 Swiss franc. The exchange rate is expected to be $1.00 = 1.25 Swiss franc in six months. The U.S. dollar is expected to A. depreciate and the U.S. will import more from Switzerland B. appreciate and the U.S. will export more to Switzerland C. appreciate and the U.S. will import more from Switzerland D. depreciate and the U.S. will export more to Switzerland
Question: How do exchange rate systems, such as fixed and floating exchange rates, influence international trade and financial stability? A) Exchange rate systems have no impact on international trade or financial stability. B) Fixed exchange rate systems promote exchange rate stability but can lead to trade imbalances, while floating exchange rate systems can enhance international trade but may result in exchange rate volatility. The choice of exchange rate system depends on a country's economic goals and preferences. C) Fixed exchange rate systems always lead to trade deficits. D) Floating exchange rate systems always lead to currency devaluation.
3. The currency stabilization fund Suppose the Russian government recognizes that its reliance on oil exports makes it vulnerable to the Dutch Disease. On the one hand, if oil prices increase, the Russian ruble will appreciate, the real exchange rate will increase, and the nation's exports will become more expensive for other countries to buy. On the other hand, if oil prices fall, the Russian ruble will depreciate, and the country's revenues will decline. The Russian government creates a currency stabilization fund to maintain a stable exchange rate to avoid a negative outcome. To stabilize the value of a currency within a certain range, the stabilization fund managers take one of the following actions: • If the ruble depreciates below some threshold value (a floor) per ruble, the fund managers will purchase the excess supply of rubles in the international exchange market to increase the value of the ruble to at least the floor value. • If the ruble appreciates above some threshold…
5. Balance of payments and the foreign exchange market The following graph shows the market for euros in terms of dollars. The market is initially in equilibrium at $1.00 per euro and 4 billion euros. Suppose an economic expansion in the United States leads to an increase in the incomes of American households, causing imports from Europe to rise. On the graph, show the effect of an expansion in the United States that leads to an increase in American incomes.
Economics Malaysia and the United States trade with each other. The currency in Malaysia is the "ringgit". Currently the exchange rate is approximately 3 ringgit per US dollar. Suppose that the GDP deflator in Malaysia rises relative to the GDP deflator in the United States. Which of the following shifts would we see in the Malaysian forex market? The demand for US dollars would fall. The supply of US dollars would fall. The demand for Malaysian ringgit would rise. The supply of Malaysian ringgit would fall.
change rate $1.75 1.50 1.25 1.00 200 500 S d 700 900 950 1,000 S D₂ Quantity of euros traded (millions per day) 17) Refer to Figure 30-8. The equilibrium exchange rate is at A $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. At the pegged exchange rate A) there is a shortage of euros equal to 200 million. B) there is a surplus of euros equal to 700 million. Othere is a shortage of euros equal to 500 million. D) there is a surplus of euros equal to 300 million.
At the official exchange rate of 2.5 dirham per euro, the euro is and the Moroccan dirham is that Moroccans pay for European exports than they would with a free-floating exchange rate. At the official dirham price of euros, there is a of euros in the foreign exchange market. which means Suppose the governments of the Eurozone and Morocco reevaluate their currencies so that their official exchange rate is now 1 dirham per 1 euro. This action results in of the euro.
The following graph shows the market for euros in terms of dollars. The market is initially in equilibrium at $2.00 per euro and 8 billion euros. Suppose an economic downturn in the United States leads to a drop in American incomes, causing imports from Europe to decline. On the following graph, show the effect in the market for euros of an economic downturn in the United States that leads to a drop in European incomes. DOLLAR PRICE OF EUROS 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 0 2 Supply of Euros Demand for Euros 4 6 8 10 12 QUANTITY OF EUROS (Billions of euros) 14 Under a system of flexible exchange rates, the dollar will per euro. 16 Increase income taxes in the United States. Lower interest rates by way of monetary policy. Demand for Euros Subsidize the production of certain U.S. exports to Europe. Supply of Euros ? Now suppose that the United States maintains a fixed exchange rate of $2.00 per euro. Which of the following U.S. government policies would keep the balance-of-payments…
U.S. goods exports +$ 390 U.S. goods imports - 520 U.S. service exports +145 U.S. service imports -107 Net investment income +12 Net transfers -22 Capital account -5 Foreign purchases of U.S. assets +156 U.S. purchases of foreign assets -49 The accompanying table contains hypothetical data for the U.S. balance of payments in a year. All figures are in billions of dollars. The balance on the financial account was a A. $107 billion surplus. B. $102 billion surplus. C. $107 billion deficit. D. $102 billion deficit.
Consider the exchange rate between the Saudi riyal and the euro. Suppose the Saudi government and the Eurozone governments agree to fix the exchange rate at 1 riyal per euro, as shown by the grey line on the following graph. Refer to the following graph when answering the questions that follow. EXCHANGE RATE (Riyal per euro) 4.0 3.5 3.0 1.5 1.0 0.5 0 0 4 Supply of Euros Demand for Euros 8 12 16 20 QUANTITY OF EUROS (Billions) 24 28 32 At the official riyal price of euros, there is a At the official exchange rate of 1 riyal per euro, the euro is pay and the Saudi riyal is ▼ for European exports than they would with a free-floating exchange rate. of euros in the foreign exchange market. , which means that Saudis Suppose the governments in the Eurozone and Saudi Arabia agree to change the official exchange rate from 1 riyal per euro to 2 riyal per euro. The action represents a of the euro and a of the riyal.
a decrease an increase no change REAL GDP our answer to the graph question, the appreciation of the U.S. dollar leads to in aggregate output in the United States. in the aggregate price level and
5. Balance of payments and the foreign exchange market The following graph shows the market for euros, which is initially in equilibrium. Suppose an economic expansion in Canada leads to an increase in the incomes of Canadian households, causing imports from Europe to rise. On the graph, illustrate the effect of an economic expansion on the market for euros by shifting the appropriate curve or curves. 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. EXCHANGE RATE (Dollars per euro) Supply 1.25 XXX 1.00 0.75 2.00 1.75 1.50 0.50 0.25 0 Demand Supply Flexible exchange rates Fixed exchange rates (?)

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