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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If the United States had a capital and financial account deficit of $50 billion, we could say the United States had Please choose one: O a net imports of $50 billion O b.a current account deficit of $50 billion O c net foreign borrowing of $50 billion OD. acquired net foreign assets of $50 billion.
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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
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.
If the foreign price level rises, there is a(n) and net exports Select one: O a. appreciation of the nominal exchange rate; rise. O b. depreciation of the real exchange rate; rise. O c. depreciation of the real exchange rate; fall. O d. appreciation of the real exchange rate; rise. O e. depreciation of the nominal exchange rate; rise. Clear my choice
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.
Paul can produce 12 bu. of wheat or 4 bu. of corn if he produces only one product. Sam can produce 3 bu. of wheat or 3 bu. of corn if he produces only one product. A mutually beneficial exchange rate for Paul and Sam would be O 1 bu of wheat for 1/4 bu. of corn. O 1 bu, of wheat for 2 bu, of com. O 1bu. of corn for 2 bu. of wheat. O Ibu. of corn for 3 1/2 bu. of wheat.
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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?