Answered: An increase in the interest rate causes…

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An increase in the interest rate causes investment to

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter11: Foreign Exchange, Trade, And Bubbles

Section: Chapter Questions

Problem 9MC

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If the prices in the United States rise faster than in Japan, a. then interest rate parity must not hold b. the exchange rate remains the same. c. the United States dollar will depreciate. d. the Japanese yen will depreciate.
A low exchange rate results in Select one: a. The imports of a country increasing b. Cheaper imports c. A downward pressure on inflation d. Encourages foreign direct investment e. The exports of a nation becoming more competitive
Please explain flexible and fixed exchange rates. Show ways to maintain a strong or a weak currency.
The theory of purchasing power parity says: Answer a. The real exchange rate is always greater than one b. The real exchange rate is always less than one c. The dollar price of a basket of goods in the U.S. should equal the yen price of a basket of goods in Japan d. A dollar should buy the same goods no matter where in the world you go
The graph shows the demand curve for U.S. dollars. Draw a new demand curve that shows the effect of an increase in the world demand for U.S. exports. Label it. A change in the expected future exchange rate changes the demand for U.S. dollars and a change in the world demand for U.S. exports changes the demand for U.S. dollars A. today; in the future B. in the future; today C. in the future; in the future D. today; today 160 140- 120- 100- 80- 60- 40+ Exchange rate (yen per U.S. dollar) Do 1.3 1.5 1.6 1.7 1.4 Quantity (trillions of U.S. dollars per day) >>> Draw only the objects specified in the question. 1.8
Draw a demand for dollars curve. Label it D. Draw a supply of dollars curve . Label it S. Draw a point at the equilibrium quantity and exchange rate. Draw an arrow between the D and S curves that indicates a price at which there is a shortage of dollars. Label it When there is a shortage of dollars in the foreign exchange market, ------------. A. The demand for Japanese yen will increase so the foreign exchange market can move into equilibrium B. The supply of Japanese yen will increase so the foreign exchange market can move into equilibrium C. The forces of supply and demand pull the foreign exchange market into equilibrium D. Prices in the United States will fall relative to prices in Japan.
If there is a decrease in the desire of foreigners to purchase goods and services from the United States and a lower desire to invest in U.S. banks and businesses, then how would this affect the U.S. foreign exchange market? A. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would depreciate. B. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would appreciate. C. The equilibrium quantity of foreign currency would increase and the U.S. dollar would depreciate. D. The equilibrium quantity of foreign currency would increase and the U.S. dollar would appreciate.
If a country has a floating exchange rate will a rise in exchange rate be bad or good for exporters?
It is often believed that the value of the currency of some countries are too low, which gives the firms in those countries an unfair competitive advantage. Econometric evidence indicates that relative PPP does not hold in the short-run, while it does hold in the long-run. a. What does this imply for countries with a fixed exchange rate that is 'unfairly low'? b. Can a country maintain an 'unfair' competitive advantage in the long-run by somehow manipulating its exchange rate? Explain. c. Assume the UK and the US are the only countries in the world. Explain what will happen in the long run to the pound and the nominal interest rate in the UK as a result of a decrease in the expected inflation rate in the UK..
The theory of purchasing power parity says: a. The real exchange rate is always greater than one b. The real exchange rate is always less than one c. The dollar price of a basket of goods in the U.S. should equal the yen price of a basket of goods in Japan d. A dollar should buy the same goods no matter where in the world you go
Someone please answer this question asapIn the U.S. a digital camera costs $150. The same camera in London sells for 60 pounds. If the exchange rate is 0.50 pounds per dollar, then which of the following is correct? A. The real exchange rate is greater than 1. A person in London with $150 could exchange them for pounds and have more than enough to buy the camera there. B. The real exchange rate is less than 1. A person in London with $150 could exchange them for pounds but then wouldn’t have enough to buy the camera. C. The real exchange rate is greater than 1. A person in London with $150 could exchange them for pounds but then wouldn’t have enough to buy the camera there. D. The real exchange rate is less than 1. A person in London with $150 could exchange them for pounds and have more than enough to buy the camera there.
How does a fall in the exchange rate cause an increase in the cost of raw imported materials?