Dollars per Franc So .70 .60 .50 40 Do D2 3 4 5 6 7 Quantity of Francs (Millions) Refer to Figure 14.1. Suppose that the United States increases its imports from Switzerland, resulting in a rise in the demand for francs from Do to D1. Under a floating exchange rate system, the new equilibrium exchange rate would be: Select one: a. $0.40 per franc b. $0.50 per franc С. $0.60 per franc d. $0.70 per franc

Dollars per Franc So .70 .60 .50 40 Do D2 3 4 5 6 7 Quantity of Francs (Millions) Refer to Figure 14.1. Suppose that the United States increases its imports from Switzerland, resulting in a rise in the demand for francs from Do to D1. Under a floating exchange rate system, the new equilibrium exchange rate would be: Select one: a. $0.40 per franc b. $0.50 per franc С. $0.60 per franc d. $0.70 per franc

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Question 7 According to, "Exchange Rates-Economics U$A," gold was exported from the USA in the early 1930s because: O It could command a higher price overseas. US consumers preferred silver jewelry to gold jewelry. People believed that the US would soon abandon the gold standard. US interest rates were too high relative to its trading partners. Question 8 According to, "Exchange Rates-Economics U$A,"after the UK abandoned the gold standard the value of the British pound and this caused UK exports to and imports to fall, fall, rise fall, fall, fall Orise, fall, rise fall, rise, fall --- -11'
1. Individual Problems 11-1 Suppose that the euro is trading at $1.85 per euro in the foreign exchange market. Next, suppose that the exchange rate falls to $1.11 per euro, due to falling interest rates in the eurozone. The following graph shows the supply and demand curves for euros in the foreign exchange market. On the following graph, shift either the supply curve for euros or the demand curve for euros to reflect the influence of “carry trade” (in isolation from other factors that may affect the exchange rate) on the exchange rate for euros. (Hint: Carefully consider which price is measured on the vertical axis and which currency is being measured on the horizontal axis.)
3. Suppose that the nominal exchange rate of the dollar in terms of yen is ¥175/S. The price level in Japan is expected to grow by 5%. The price level in the United States is expected to grow by 2%. a. Find the exact currency movement for the dollar if the real exchange rate decreases by 1.7%. Make sure to show your work. b. Find the approximate currency movement for the dollar if the real exchange rate decreases by 1.7%. Make sure to show your work. c. How would your answers to parts (a) and (b) change if PPP were correct? Make sure to show your work.
Figure 2.3: S$i£ 2.20 2.00 1.90 The Market for British Pounds D E Q5 Q4 Q₁ B Q₂ S₁(£) D₂(£) D₁ (£) D3(£) Q3 Quantities of pound Refer to Figure 2.3. Suppose that the spot exchange rate of British pound is $2.00 per pound. Suppose that the U.S. decreases its taste for imports from the Under a flexible exchange rate system, the Bank of England will: Let the British pound appreciate Let the British pound depreciate Sell pounds and buy dollars in foreign exchange market Sell dollars and buy pounds in foreign exchange market
If the exchange rate moves from $1 for one Euro to $1.50 for one Euro, then Select one: a. it becomes more expensive for a European to buy a European product. b. it becomes more expensive for an American investor to save at an American bank. c. it becomes more expensive for an American to buy a Mexican product. d. it becomes more expensive for an American to buy a European product.
Price per euro P₂ P₁ Po Qo Q₁ Q₂ Q3 1) the excess demand of euro equal to Q3 - Q1. In the above figure, suppose the value of the European euro is P₁ and U.S. demand for French wine declines. The effect on the franc can be shown by S 3) the decrease in the value of the euro to Po. Quantity of euros 2) a shift in the demand for euros from D₁ to Do, but no change in the value of the euro. 4) an increase in the value of the euro to P2.
Draw and carefully label the Euro-U.S. dollar foreign exchange graph as discussed in the textbook. Assume we are currently in market equilibrium. Illustrate using the graph how the equilibrium euro/dollar foreign exchange rate would be affected by the following events, holding all else constant. Explain in words why the equilibrium exchange rate changed An increase in US short-term interest rates while Euro interest rates were unchanged.
Suppose the average price of a Big Mac in the United States is $3.50 while in Japan the average price is 400 yen. If the market exchange rate is that 1 dollar is exchanged for 100 yen, the purchasing power parity model of exchange rate determination suggests that: a. the yen is overvalued. b. the yen value is about correct. C. the price of a Big Mac in Japan will rise. d. the dollar will depreciate against the yen.
Several members of Congress have been highly critical of Japan and China because U.S. Imports from these countries have persistently been substantially greater than our exports to them. True or False: Under a flexible exchange rate system, imports and exports to any given country will be equal. True O False Japan is a major importer of resources like oil and a major exporter of high-tech manufacturing goods. a large amount of high-tech manufacturing goods and with Japan. The United States United States persistently runs a trade very little oll. Thus, it is understandable that the
5) Indicate whether each of the following creates a demand for or a supply of European euros in foreign exchange markets: a. Liberty purchases an Airbus plane assembled in France b. Mercedes-Benz decides to build an assembly plant in Knoxville c. A Liberty student decides to spend a year studying at the Sorbonne in Paris d. An Italian manufacturer ships machinery from Rome to Venice on an Egyptian freighter e. It is widely expected that the euro will depreciate in the near future
The graph shows the supply curve of Canadian dollars. Draw a new supply curve that shows the effect of a rise in the expected future exchange rate. Label it. A change in the expected future exchange rate changes the supply of Canadian dollars________, and a change in Canadian demand for imports changes the supply of Canadian dollars O A. today; today B. in the future; today C. today; in the future D. in the future; in the future 120 MacBook Pro 110 100- 90- 80- 70- Exchange rate (Canadian cents per Canadian dollar) Click the graph, choose a tool in the palette and follow the instructions to create your graph. So 70 80 90 100 10 20 30 40 50 60 Quantity (billions of Canadian dollars per day) >>> Draw only the objects specified in the question.
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