A country has $60 million of saving and domestic investment of $40 million. Net exportsare1.O -$100 million.2. O $100 million.3. O -$20 million.4. O$20 million.Purchasing-power parity implies that the nominal exchange rate given as foreigncurrency per unit of domestic currency must rise if the price levels in1.O both countries fall.2. O foreign countries rise.3. O both countries rise.4. O the domestic country rises.If purchasing power parity holds, the real interest rate is1.O P/P*2. Oequal to 03. O equal to 14. O equal to nominal interest rateConsider a following closed economy.Y = 10,000C = 6,000T = 1,500G = 1,700The economists also estimate that the investment function is;| = 3,000 – 100rObtain the value ofPublic saving:Private saving:Investment:real interest rate (r): a) Suppose that there are diminishing returns to capital. Suppose also that two countriesare the same except one has more capital per worker and so it has more real GDP perworker than the other. Over the next ten years we would expect that1. O both countries will grow and at the same rate.2. O the growth rate will not change in either country.3. O the country that started with more capital per worker will grow faster.4. O the country that started with less capital per worker will grow faster.b) All else equal, which of the following would tend to cause real GDP per person to rise?1.O a reduction in saving rate.2. O an increase in investment in human capital3.a change from outward-oriented policies to inward-oriented policies4. O a weakening of property rights

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A country has $60 million of saving and domestic investment of $40 million. Net exports are 1. O -$100 million. 2. O $100 million. 3. O -$20 million. 4. $20 million. Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of domestic currency must rise if the price levels in 1.O both countries fall. 2. O foreign countries rise. 3. O both countries rise. 4. O the domestic country rises. If purchasing power parity holds, the real interest rate is 1.O P/P* 2. O 3. O equal to 1 4. O equal to nominal interest rate equal to 0 Consider a following closed economy. Y = 10,000 C = 6,000 T= 1,500 G = 1,700 The economists also estimate that the investment function is; | = 3,000 – 100r Obtain the value of Public saving: Private saving: Investment: real interest rate (r):

A country has $60 million of saving and domestic investment of $40 million. Net exports are 1. O -$100 million. 2. O $100 million. 3. O -$20 million. 4. $20 million. Purchasing-power parity implies that the nominal exchange rate given as foreign currency per unit of domestic currency must rise if the price levels in 1.O both countries fall. 2. O foreign countries rise. 3. O both countries rise. 4. O the domestic country rises. If purchasing power parity holds, the real interest rate is 1.O P/P* 2. O 3. O equal to 1 4. O equal to nominal interest rate equal to 0 Consider a following closed economy. Y = 10,000 C = 6,000 T= 1,500 G = 1,700 The economists also estimate that the investment function is; | = 3,000 – 100r Obtain the value of Public saving: Private saving: Investment: real interest rate (r):

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 most important force determining fluctuations of foreign exchange rates is O A. expectations of currency speculators. O B. interest rate differentials. OC. purchasing power parity. O D. Canadian real GDP. If more Americans visit Canada and demand Canadian dollars, O A. the Canadian dollar depreciates against the U.S. dollar. O B. the Canadian exchange rate falls. O C. the Canadian exchange rate rises. O D. the U.S. dollar appreciates against the Canadian dollar.
6. Most foreign exchange transactions are through the U.S. dollar. If the transaction is expressed as the foreign currency per dollar this is known as _____________ whereas ___________ are expressed as dollars per foreign unit. a. European terms; indirect b. American terms; direct c. American terms; European terms d. European terms; American terms
15. Which of the given statements concerning the market for foreign currency exchange is true? a. An increase in Canadian net capital outflow increases the supply of Canadian dollars and the Canadian dollar appreciates. b. An increase in Canadian net capital outflow increases the demand for Canadian dollars and the Canadian dollar appreciates. c. An increase in Canadian net capital outflow increases the demand for Canadian dollars and the Canadian dollar depreciates. d. An increase in Canadian net capital outflow increases the supply of Canadian dollars and the Canadian dollar depreciates. e. None of the above.
Use the following graph, which shows the supply and demand curves for dollars in the pound/dollar market, to answer the next question. Pound Price of Dollars 1/4 1/5 O Q₁ M D₁ D₂ Q₂ Q3 Quantity of Dollars D₂ Assume that D1 and S1 are the initial demand for and supply of dollars. Now suppose that Great Britain increases its imports of American products. Assuming freely-floating exchange rates, A) the dollar price of pounds will increase to $5 = 1 pound B) the pound price of dollars will rise to 1/4 pound = $1
If the forecast UK inflation rate is 5% and the forecast European inflation rate is 2% and the spot exchange rate is €1.20/£1. Then according to relative PPP which of the following statements is correct? Select one: a. O b. The euro is forecast to appreciate by 3% to approximately €1.236/£1 O c. The pound is forecast to depreciate by 3% to approximately €1.1650/£1 O d. The euro is forecast to depreciate by 3% to approximately €1.1650/£1 The pound is forecast to appreciate by 3% to approximately €1.236/£1
Practice Exchange Rate 1- $/yen = .009, yen/pound= 120, $/pound= 1.15 a. Is there alignment of exchange rates? b. Will arbitrage take place? c. At what direction the arbitrage will take place? d. For an investor investing $1000000, what will be the gain? 2- January 2022 spot yen/$ rate was 110. January 2023 spot yen/$ rate was 105. a. Which currency did appreciate b. Which currency did depreciate ? By how much ? By how much ? ? 3- Nominal $/pound = 1.20. CPIusa = 115, CPIuk = 120. What is the real exchange rate (base year 2012)? 4- The change in nominal exchange rate ($/pound) from 2012 to 2022 was 7%. Since 2012, inflation in US has increased by 15%, inflation in UK has increased by 19%. What is the real change in exchange rate?
Suppose a computer costs $500 in the United States. With the price of the computer given in the local currency, the Brazilian real is by Country Brazil (real) Mexico (peso) India (rupee) South Africa (rand) overvalued by 9%. overvalued by 45%. O undervalued by 90%. undervalued by 9%. Exchange Rate per U.S. Dollar 2.2 10 45 8 Price of a Computer in Local Currency 1,200 6,000 18,000 3,500
2. If imports = 500 billion euros, exports = 700 billion euros, purchases of domestic assets by foreign residents = 600 billion euros, and purchases of foreign assets by domestic residents = 800 billion euros, what is the quantity of euros demanded in the market for foreign currency exchange? a. 1,100 billion euros b 600 billion euros c. 500 billion euros d. 200 billion euros