Refer to the following table, in which Qd is the quantity of loonies demanded, P is the dollar price of loonies, Qs is the quantity of loonies supplied in year 1, and Qg' is the quantity of loonies supplied in year 2. All quantities are in billions and the dollar-loonie exchange rate is fully flexible. Od 10 15 20 25 P 125 120 115 110 Qs 30 25 20 15 Qs 20 15 10 5 Instructions: Enter your answers as whole numbers. a. What is the equilibrium dollar price of loonies in year 1? b. What is the equilibrium dollar price of loonies in year 2?

Refer to the following table, in which Qd is the quantity of loonies demanded, P is the dollar price of loonies, Qs is the quantity of loonies supplied in year 1, and Qg' is the quantity of loonies supplied in year 2. All quantities are in billions and the dollar-loonie exchange rate is fully flexible. Od 10 15 20 25 P 125 120 115 110 Qs 30 25 20 15 Qs 20 15 10 5 Instructions: Enter your answers as whole numbers. a. What is the equilibrium dollar price of loonies in year 1? b. What is the equilibrium dollar price of loonies in year 2?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Introduction to the foreign-currency exchange market
Advanced Analysis: Refer to the following table, in which Qd is the quantity of loonies demanded, P is the dollar price of loonies, Qs is the quantity of loonies supplied in year 1, and Qs' is the quantity of loonies supplied in year 2. All quantities are in billions. Further, assume that the exchange rate is fixed at 110. Qd P Qs Qs' 10 125 30 20 15 120 25 15 20 115 20 10 25 110 15 5 Instructions: Enter your answers as whole numbers. a. In year 1, what would be the minimum initial size of the U.S. reserve of loonies such that it could maintain the peg throughout the year? billion loonies b. What about the minimum initial size that would be necessary at the start of year 2? billion loonies Next, consider only the data for year 1. c. What peg should the United States set if it wants the fixed exchange rate to increase the domestic money supply by $1.2 trillion? dollars per loonie
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4 b. What about the minimum initial size that would be necessary at the start of year 2? billion loonies Next, consider only the data for year 1. c. What peg should the United States set if it wants the fixed exchange rate to increase the domestic money supply by $2.5 trillion? dollars per loonie