(a) Consider the exchange rate between US dollar and British pound. Let CPI be the consumer price index,or equivalently the average price level in a country. Assume the ratio CPIUK/CPIUS =0.75. According to thelaw of one price, what must be the exchange rate between US dollar and British pound (i.e. 1 poundequals to how many dollars)?Sunnese theore are three investment nroiects A. R.Rand C

Goods should cost same in all countries. This is the Law of One Price. So, exchange rate should be…

Answered: (a) Consider the exchange rate between…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the foreign exchange market. For each of the scenarios below, answer thefollowing questions: (1) Which curve moves? (2) In which direction does it move? (3)What happens to the nominal exchange rate in equilibrium (i.e., does the US Dollarappreciate or depreciate)?(a) Brazil places tariffs on US products, limiting imports from America.(b) The US becomes a much riskier place to invest because of widespread politicalunrest.(c) Firms in the UK become much more profitable than those in the US.(d) The global economy surges, sparking higher consumption everywhere in the world.(e) Japan’s central bank cuts interest rates in that country.(f) Mexico’s firms do a much better job of marketing their products to the UnitedStates.
1. – Using the following information, determine each one of the theoretical Exchange Rates (E.R.) for December of year 02 according to the Relative PPP Theory. ΜARKET MARKEΤ E.R. E.R. COUNTRY CURRENCY CPI CPI Dec-01 Dec-02 Dec-01 Dec-02 Mexico MXP 231.89 264.3546 19.56 20.15 Turkey TRY (Lira) 498 527.88 5.9419 6.07673 Australia AUD 989 1038.45 1.7759 1.81183 Jaрan JPY 678 745.8 105.866 113.978 United GBP 905.26 986.7334 0.5991 0.617849 Kingdom South Korea KRW (Won) 795.4 874.94 1,658.62 1,793.37 Canada CAD 523.12 554.5072 1.3736 1.4942 U.S.A. USD 1.5 1.56
For a European investor, what is the rate of return in euro on: “a ¥10,000 deposit in a Japanese bank in a year when the interest rate on Yen is 12 % and the Yen per euros exchange rate moves from ¥1.40 per euros to ¥1.20 per euros” A. Compute the rate of return without the formula B. Compute the approximation of this rate of return using the formula Only typed answer
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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.
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Time left 0:56 Currently, It takes two Belize dollars to buy a U.S. dollar. If that number were to rise to three, then the Belize currency would have (appreclated, depreclated) and It would be (more, less) expensive for American tourlsts to vacation In Bellze. Select one: a. depreclated; more O b. depreciated; less. Oc. appreciated; more. d. appreclated; less. Next page
A strong U.S. dollar means that U.S. goods exported abroad will cost: O A. less in foreign countries and foreign goods imported will cost less in the United States. B. less in foreign countries and foreign goods imported will cost more in the United States. C. more in foreign countries and foreign goods imported will cost more in the United States. D. more in foreign countries and foreign goods imported will cost less in the United States.
Hand written plz otherwise downvote If a country switches from a flexible exchange rate regime to a fixed exchange rate regime, this implies that: O a given change in government spending will now have a greater effect on output both fiscal and monetary policy will become more effective in changing GDP O both fiscal and monetary policy will become completely ineffective in changing GDP O monetary policy will become a more effective tool for changing output O a given change in government spending will now have a smaller effect on output
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If the government wants to O decrease; contractionary O increase; expansionary O increase; only rules-based O decrease: expansionary the value of its currency in the foreign exchange market, it can use monetary policy.

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