2. Inflation in Brazil is 5% and in the US it is 2%. The GDP growth rate is 2% in both countries. The exchange rate is 7 Brazilian real (BRL) per USD. Use Brazil as the domestic country. a. If PPP is true, what will the BRL/USD exchange rate be next year? b. If PPP is true, what will happen to the real exchange rate? Explain with an equation. c. If the quantity theory of money is correct, how fast is the money supply growing in Brazil and the US?

2. Inflation in Brazil is 5% and in the US it is 2%. The GDP growth rate is 2% in both countries. The exchange rate is 7 Brazilian real (BRL) per USD. Use Brazil as the domestic country. a. If PPP is true, what will the BRL/USD exchange rate be next year? b. If PPP is true, what will happen to the real exchange rate? Explain with an equation. c. If the quantity theory of money is correct, how fast is the money supply growing in Brazil and the US?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Why would a country want to impose an exchange rate ceiling? a. A strong currency encourages imports and can be used to fight inflation. b. A strong currency stimulates an economy. c. A weak currency encourages imports and can be used to fight inflation. d. A weak currency will encourage exports and stimulate the economy.
12.When the Chips Are Down The Economist magazine uses the price of a Big Mac to determine whether a currency is undervalued or overvalue. In July 2010, the price of a Big Mac was $3.73 in New York, 13.2 yuan in Beijing, and 6.50 Swiss francs in Geneva. The exchanges rates were 6.78 yuan per U.S. dollar and 1.05 Swiss francs per U.S. dollar. a. Was the yuan undervalued or overvalued relative to purchasing power parity? b. Was the Swiss franc undervalued or overvalued relative to purchasing power parity c. Do you think the price of a Big Mac in different countries provides a valid test of purchasing power parity? 13.The price level in the Eurozone is 112.4, the prize level in the United States in 109.1 and the nominal exchange rate was 80 euro cents per U.S dollar. what was the real exchange rate expressed as Eurozone real GDP per unit of U.S. read GDP? 14.The Canadian price level is 106.3 the Japanese price level is 95.4 and the real exchange rate is 103.6…
If for some reason Americans desired to increase their purchases of foreign assets, then other things the same A. both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would rise. B. both the real exchange rate and the quantity of dollars exchanged in the market for foreign currency would fall. C. the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign currency would fall. D. the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign currency would rise.
31. The __________ exchange rate is a weighted average of the market rates across a number of foreign currencies. a. Nominal bilateral b. Real bilateral c. Nominal effective d. Real effective 32. The __________ exchange rate incorporates both the market exchange rate and the product price levels for two countries. a. Nominal bilateral b. Real bilateral c. Nominal effective d. Real effective 33. The __________ exchange rate is a weighted average of the real bilateral exchange rates across a number of foreign countries. a. Nominal bilateral b. Real unilateral c. Nominal effective d. Real effective 34. Studies of exchange rate prediction models conclude that: a. Structural economic models cannot reliably out predict the naÃ¯ve alternative of a random walk for short forecast horizons. b. Structural economic models reliably out predict the naÃ¯ve alternative of a random walk for short forecast horizons. c. Structural economic models cannot out predict the…
Suppose the foreign central bank increases in the foreign quantity of money, and the change is expected to be permanent. a. Describe the effect of on the nominal exchange rate in the short run. b. Describe the effect of on the nominal exchange rate in the long run. c. Graph the the short-run and long-run effects in the foreign exchange market. d. Draw an impulse respo se g aph for the nominal exchange rate that reflects the short-run and long-run effects. For your graphs, draw them on a single sheet of paper and either scan or photograph it or add it as an attachment to this question. If you choose to photograph it, make sure your your graphs are clearly visible. If I can't read it, I can't grade it.
In a fixed exchange rate system, ..... A. the International Monetary Fund determines exchange rates. B. market forces play a role in determining the fixed value of a currency. C. market forces and the country's stock of gold determine its exchange rate. D. a central bank affects the value of a currency by changing its foreign exchange reserves.
1. Assume the theory of absolute convergence is literally true. The current GDP per capita of Iran is $5000 and the current GDP per capita of Switzerland is $30000. What will happen to the difference between these two countries in the "long run"? 2. What has to be true of the capital account between two countries if the current account is negative? Answer 2nd Question
Please show the solutions to all the question from 1-5. I need to know how to solve all of them
Question 2 of 25 In which situation is a country most likely to choose a flexible exchange rate for its currency? O A. A country believes that its currency will be in low demand in global markets. B. A country worries that the value of its currency could rise and fall unpredictably. C. A country has a reputation for having a strong and stable economy over time. O D. A country wants to make sure that its currency is stable in all economic situations.
Which of the following will most likely cause a nation's currency to appreciate on the foreign exchange market? a. A decrease in domestic interest rates O b. An increase in foreign interest rates c. Stable domestic prices while the nation's trading partners are experiencing 10 percent inflation O d. Domestic inflation of 10 percent while the nation's trading partners are experiencing stable prices
If the domestic price level rises by 10 percent but the foreign price level is unchanged and the nominal exchange rate rises by 10 percent then the real exchange rate a. rises. b. is unchanged c. may rise or fall, it is not possible to tell. d. falls. Which of these policies is aimed at reducing frictional unemployment? a. Increased government spending that creates jobs. b. Reducing the minimum wage C. Programmes that provide re-training for workers who need new skills d . Providing funding for iob search websites such as "seek.co.nz".
a. Define the concept of equilibrium in the foreign exchange market, from an Australian perspective, using Australian dollars (AUD) and New Zealand dollars (NZD) as your currencies. Explain the factors that might bring about a fall in the exchange rate. b. What is the likely impact on Australia’s economy of a fall in the exchange rate and what can be done to prevent this from happening?