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ards to whether this possibility should worry them or not, which of the following statements is correct: O This possibility should worry them, as a devaluation of the shekel to 0.25 U.S. dollars, would put the official value of the shekel below its fundamental or equilibrium value. O This possibility should not worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth more in terms of other currencies. O This possibility should not worry them, as the nation can always print additional shekels to avoid a depreciation of the shekel. This possibility should worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth less in terms of other currencies. esponse to their concern about devaluation, foreign financial investors withdraw all funds from their checking accounts and pt to convert those shekels into dollars. erting all funds in the checking from shekels into dollars would require international reserves of $ ??, which means that the

ards to whether this possibility should worry them or not, which of the following statements is correct: O This possibility should worry them, as a devaluation of the shekel to 0.25 U.S. dollars, would put the official value of the shekel below its fundamental or equilibrium value. O This possibility should not worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth more in terms of other currencies. O This possibility should not worry them, as the nation can always print additional shekels to avoid a depreciation of the shekel. This possibility should worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth less in terms of other currencies. esponse to their concern about devaluation, foreign financial investors withdraw all funds from their checking accounts and pt to convert those shekels into dollars. erting all funds in the checking from shekels into dollars would require international reserves of $ ??, which means that the

ENGR.ECONOMIC ANALYSIS
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 annual demand for and supply of shekels in the foreign exchange market is given as: Demand = 30,000 8,000e Supply = 25,000 + 12,000e where the nominal exchange rate (e) is expressed as U.S. dollars per shekel. The shekel is fixed at 0.30 dollars per shekel. The country's international reserves are $600. Foreign financial investors hold checking accounts in the country in the amount of 5,000 shekels. a. Suppose that foreign financial investors do not fear a devaluation of the shekel, and thus do not convert their shekel checking accounts into dollars. ?? which means that the country can After one year, the value of the country's international reserves is fixed value of 0.30 U.S. dollars per shekel. b. Now suppose that foreign financial investors come to expect a possible devaluation of the shekel to 0.25 U.S. dollars. In regards to whether this possibility should worry them or not, which of the following statements is correct: maintain its O This possibility should worry them, as a devaluation of the shekel to 0.25 U.S. dollars, would put the official value of the shekel below its fundamental or equilibrium value. O This possibility should not worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth more in terms of other currencies. O This possibility should not worry them, as the nation can always print additional shekels to avoid a depreciation of the shekel. ● This possibility should worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth less in terms of other currencies. c. In response to their concern about devaluation, foreign financial investors withdraw all funds from their checking accounts and attempt to convert those shekels into dollars. Converting all funds in the checking from shekels into dollars would require international reserves of $ country cannot ✓maintain its fixed value of 0.30 U.S. dollars per shekel for this year. ??, which means that the
Transcribed Image Text:The annual demand for and supply of shekels in the foreign exchange market is given as: Demand = 30,000 8,000e Supply = 25,000 + 12,000e where the nominal exchange rate (e) is expressed as U.S. dollars per shekel. The shekel is fixed at 0.30 dollars per shekel. The country's international reserves are $600. Foreign financial investors hold checking accounts in the country in the amount of 5,000 shekels. a. Suppose that foreign financial investors do not fear a devaluation of the shekel, and thus do not convert their shekel checking accounts into dollars. ?? which means that the country can After one year, the value of the country's international reserves is fixed value of 0.30 U.S. dollars per shekel. b. Now suppose that foreign financial investors come to expect a possible devaluation of the shekel to 0.25 U.S. dollars. In regards to whether this possibility should worry them or not, which of the following statements is correct: maintain its O This possibility should worry them, as a devaluation of the shekel to 0.25 U.S. dollars, would put the official value of the shekel below its fundamental or equilibrium value. O This possibility should not worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth more in terms of other currencies. O This possibility should not worry them, as the nation can always print additional shekels to avoid a depreciation of the shekel. ● This possibility should worry them, as a depreciation of the shekel would mean that the shekel would suddenly become worth less in terms of other currencies. c. In response to their concern about devaluation, foreign financial investors withdraw all funds from their checking accounts and attempt to convert those shekels into dollars. Converting all funds in the checking from shekels into dollars would require international reserves of $ country cannot ✓maintain its fixed value of 0.30 U.S. dollars per shekel for this year. ??, which means that the
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