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- If a countrys currency is expected to appreciate in value, what would you think will be the impact of expected exchange rates on yields (e.g., the Interest rate paid on government bonds) in that country? Hint: Think about how expected exchange rate changes and interest rates affect a currencys demand and supply.Does a higher rate of return in a nations economy, all other things being equal, affect the exchange rate of its currency? If so, how?2. Determining long-term exchange rates Consider two countries, the United States and Japan, that trade with each other. Suppose that the productivity growth in the United States accelerates, but it remains the same in Japan. The following graph shows the supply and demand for the Japanese yen in the United States before the change in productivity. The vertical axis is the exchange rate of the yen in terms of the doliar, and the horizontal axis is the quantity of yen. Show how the change in productivity affects the equilibrium exchange rate by shifting one or both of the curves on the graph Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther EXCHANGE RATE (Dolars per yen Supply Demand QUANTITY (Millions of yer) As a result of the change in productivity, the U.S. dollar appreciates depreciates Demand Supply
- What happens if there is a shortage or a surplus of Canadian dollars in the foreign exchange market? *** If a shortage of Canadian dollars occurs in the foreign exchange market, the and the exchange rate A O A. quantity of Canadian dollars demanded increases and the quantity of Canadian dollars supplied decreases; falls OB. demand for Canadian dollars increases and the supply of Canadian dollars decreases; rises OC. quantity of Canadian dollars demanded decreases and the quantity of Canadian dollars supplied increases; COLL 120- 110 100+ 90- 80- 70- Exchange rate (U.S. cents per Canadian dollar) S 60+ DThe demand for Australian dollars in the foreign exchange market equals 14000 – 3000e and thesupply of Australian dollars in the foreign exchange market equals 2000 + 2000e, where e is thenominal exchange rate expressed in euros per Australian dollar. If the Australian dollar is fixed at 2euros per Australian dollar, then to maintain this fixed rate, what is the required change in theReserve Bank of Australia’s holdings of euros? 1increase by 4000 euros 2decrease by 2000 euros 3decrease by 4000 euros 4increase by 2000 euros. If a US resident spends $1,000 to buy €880 worth of French burgundy wine, the US balance of payments shows… a) current acct imports of -$1,000 and capital acct exports of +€880 b) current acct imports of -€880 and capital acct exports of -$1,000 c) current acct imports of -$1,000 and capital acct exports of +$1,000 d) capital acct exports of +$1,000 and capital acct imports of -$1,000.
- change rate $1.75 1.50 1.25 1.00 200 500 S d 700 900 950 1,000 S D₂ Quantity of euros traded (millions per day) 17) Refer to Figure 30-8. The equilibrium exchange rate is at A $1.25/euro. Suppose the European Central Bank pegs its currency at $1.00/euro. At the pegged exchange rate A) there is a shortage of euros equal to 200 million. B) there is a surplus of euros equal to 700 million. Othere is a shortage of euros equal to 500 million. D) there is a surplus of euros equal to 300 million.5. If the US dollar appreciated against the Japanese yen what would you expect to happen to US net exports to Japan?2. Determining long-term exchange rates Consider two countries, the United States and Japan, that trade with each other. Suppose that the productivity growth in the United States accelerates, but it remains the same in Japan. The following graph shows the supply and demand for the Japanese yen in the United States before the change in productivity. The vertical axis is the exchange rate of the yen in terms of the dollar, and the horizontal axis is the quantity of yen. Show how the change in productivity affects the equilibrium exchange rate by shifting one or both of the curves on the graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply Demand Supply Demand EXCHANGE RATE (Dollars per yer
- 2. Determining long-term exchange rates Consider two countries, the United States and Japan, that trade with each other. Suppose that the productivity growth in the United States accelerates, but it remains the same in Japan. The following graph shows the supply and demand for the Japanese yen in the United States before the change in productivity. The vertical axis is the exchange rate of the yen in terms of the dollar, and the horizontal axis is the quantity of yen Show how the change in productivity affects the equilibrium exchange rate by shifting one or both of the curves on the graph Note: Select and drag one or both of the curves to the desired position. Curves will snap Into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther EXCHANGE RATE (Dollars per yeni Demand QUANTITY (Millions of yen) As a result of the change in productivity, the U.S. doilar appreciates depreciates Demand 161 SupplyGive typing answer with explanation and conclusion Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. Initially, the supply curve for USD is 100 + eN bln dollars per week and the demand curve is 140 - eN bln dollars per week. There is a financial crisis in Mexico and the government fears that it may lead to capital outflows that would make the crisis even worse. They decide that if Mexican Peso depreciates by more than 20% the central bank will step in and fix the exchange rate. As the crisis unfolds the demand for the U.S. dollars increases to 142 - eN and the supply of dollars falls to 99 + eN. How should the central bank of Mexico react to this change?QUESTION 2 N Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. If the supply curve for USD shifted from 100+e to 104+eN bln dollars per week and the demand curve shifted from bln dollars per week, then the exchange rate changed by 140-e - eN to 142-eN percent. Note: Type in your answer rounded to two decimal places, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard may automatically delete it and you should not do anything about it. In case of percentages, do not type in the percentage symbol "%". If your answer is a negative number, type a dash in front of your answer, i.e, "-999.99".