8. Problems and Applications Q3The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand,some in the popular press have claimed that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreignproducts.Assume that U.S. products did decline in relative quality during the 1980s.This caused net exports at any given exchange rate to decreaseIndicate the effect of this shift in et exports on the U.S. market for foreign exchange.Supply4Quantity of DollarsReal Exchange RateThe real exchange rate declines.Net capital outflow is unchanged.TrueDThere is no change in the real interest rate.There is no change in the trade balance.O False1According to this model, which of the following statements are true as a result of the quality change? Check all that apply.D2TrueFalseDemandTrue or False: The claim that some people made in the popular press is consistent with the model in this chapter.Supply?True or False: The change in the real exchange rate that resulted from the decline in the quality of U.S. products may increase the U.S. standard ofliving.

8. Problems and Applications Q3 The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, some in the popular press have claimed that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreign products. Assume that U.S. products did decline in relative quality during the 1980s. This caused net exports at any given exchange rate to decrease Indicate the effect of this shift in net exports on the U.S. market for foreign exchange. Real Exchange Rate O True Supply O False Quantity of Dollars The real exchange rate declines. ✔Net capital outflow is unchanged. ✔There is no change in the real interest rate. There is no change in the trade balance. D₁ O True D₂ According to this model, which of the following statements are true as a result of the quality change? Check all that apply. O False Demand True or False: The claim that some people made in the popular press is consistent with the model in this chapter. Supply ? True or False: The change in the real exchange rate that resulted from the decline in the quality of U.S. products may increase the U.S. standard of living.

8. Problems and Applications Q3 The chapter notes that the rise in the U.S. trade deficit during the 1980s was due largely to the rise in the U.S. budget deficit. On the other hand, some in the popular press have claimed that the increased trade deficit resulted from a decline in the quality of U.S. products relative to foreign products. Assume that U.S. products did decline in relative quality during the 1980s. This caused net exports at any given exchange rate to decrease Indicate the effect of this shift in net exports on the U.S. market for foreign exchange. Real Exchange Rate O True Supply O False Quantity of Dollars The real exchange rate declines. ✔Net capital outflow is unchanged. ✔There is no change in the real interest rate. There is no change in the trade balance. D₁ O True D₂ According to this model, which of the following statements are true as a result of the quality change? Check all that apply. O False Demand True or False: The claim that some people made in the popular press is consistent with the model in this chapter. Supply ? True or False: The change in the real exchange rate that resulted from the decline in the quality of U.S. products may increase the U.S. standard of living.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 22 3 pol Suppose that • The Elasticity of Imports in the USA in the short Run is 0.5 • The Elasticity of Imports in Japan in the short Run is 0.6 • The Elasticity of Imports in the USA in the long Run is 0.9 The Elasticity of Imports in the Japan in the long Run is 1 According to the Elasticities approach to the Current Account Balance, if the Exchange Rate goes from Yen=$1/100 to Yen $1/50 . O The Current Account Balance will be unchanged • The Current Account Balance in the US will deteriorate in the short run, and improve in the long run O The Current Account Balance in the US will deteriorate in the short run and in the long run O The Current Account Balance in the US will improve both in the short run and in the long run
A. Canada produces natural resources (coal, natural gas, and others), the demand for which has increased rapidly as China and other emerging economies expand. i. Explain how growth in the demand for Canada's natural resources would affect the demand for Canadian dollars in the foreign exchange market. Explain how the supply of Canadian dollars would change. ii. iii. Explain how the value of the Canadian dollar would change. iv. Illustrate your answer with a graphical analysis. 1
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.
8. State whether each of the following events involves a financial flow to the U.S. economy or away from the U.S. economy: a. Export sales to Germany b. Returns being paid on past U.S. financial investments in Brazil c. Foreign aid from the U.S. government to Egypt d. Imported oil from the Russian Federation e. Japanese investors buying U.S. real estate
1. Imports, exports, and the trade balanceThe following table shows the approximate value of exports and imports for the United States from 1997 through 2001.Complete the table by calculating the surplus or deficit both in absolute (dollar) terms and as a percentage of GDP. If necessary, round your answers to the nearest hundredth.YearGDPExportsImportsExports – Imports(Billions of dollars)(Billions of dollars)(Billions of dollars)(Billions of dollars)(Percentage of GDP)19978,332.0 954.41,055.8 19988,794.0 953.91,115.7 19999,354.0 989.31,251.4 20009,952.0 1,093.21,475.3 200110,286.0 1,027.71,398.7 Source: “Income, Expenditures, Poverty, & Wealth: Gross Domestic Product (GDP),” United States Census Bureau, United States Department of Commerce, last modified September 2011, accessed June 10, 2013, https://www.census.gov/library/publications/2011/compendia/statab/131ed/income-expenditures-poverty-wealth.html. Between 1997 and 1998, the in dollar terms and as a percentage of GDP.
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) Indicate whether each of the following creates a demand for or a supply of European euros in foreign exchange markets: a. Liberty purchases an Airbus plane assembled in France b. Mercedes-Benz decides to build an assembly plant in Knoxville c. A Liberty student decides to spend a year studying at the Sorbonne in Paris d. An Italian manufacturer ships machinery from Rome to Venice on an Egyptian freighter e. It is widely expected that the euro will depreciate in the near future
2. Determining long-term exchange rates Consider two countries, the United States and Japan, that trade with each other. Suppose that the productivity growth in the United States accelerates, but it remains the same in Japan. The following graph shows the supply and demand for the Japanese yen in the United States before the change in productivity. The vertical axis is the exchange rate of the yen in terms of the dollar, and the horizontal axis is the quantity of yen Show how the change in productivity affects the equilibrium exchange rate by shifting one or both of the curves on the 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 EXCHANGE RATE (Dollars per yeni Demand QUANTITY (Millions of yen) As a result of the change in productivity, the U.S. doilar appreciates depreciates Demand 161 Supply
2. The Table gives some information about Canada's international transactions in 2010. Item Billions of dollars. Imports of goods and services Net foreign investment in Canada Exports of goods and services. Net interest income. Net transfers Statistical discrepancy 508 54 476 16 (-3) 1 (a) Calculate the balance on the three balance of payments accounts. (b) Was Canada a net borrower or a net lender in 2010? Explain your answer.
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 (?)
4. Pricing foreign goods The exchange rate is the price of one currency in terms of another currency. An exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table forecasts exchange rate data for March 16, 2018, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Cost of One Unit of Foreign Currency Foreign Currency (Dollars) Lithuanian litas (LTL) 0.3666 Canadian dollar (CAD) 0.8493 Euro (EUR) 1.3288 Mexican peso (MXN) 0.0889 United Kingdom pound (GBP) 1.8965 Suppose that on March 16, 2018, an antique woven rug handmade in Lithuania is priced at LTL 2,750. The approximate U.S. dollar price of the rug would be If the exchange rate for the U.S. dollar-Lithuanian litas rises from $0.3666 to $0.4216 per Lithuanian litas, the U.S. dollar v in value, or relative to the Lithuanian litas. 925 PM search N O 33°F 12/5/2021 21 hp…