QUESTION 7Guatemala is a small country in CentralAmerica. It has a fixed exchange rate withthe U.S. The Monetary base for Hondurasis 200. Domestic Credit is 40. The interestrate is 0.04 while the interest rate in theU.S is 0.04. There is an open capitalmarket and relative PPP holds at all times.Using the model and the assumptionsdeveloped in class, answer the followingquestions. The market expects theexchange rate for Guatemala toa) Appreciate by two percent.b) Depreciate by two percent.c) Stay the same Increase.d) We do not have enough information.

rica. It has a fixed exchange rate with J.S. The Monetary base for Honduras O. Domestic Credit is 40. The interest s 0.04 while the interest rate in the s 0.04. There is an open capital et and relative PPP holds at all times. g the model and the assumptions loped in class, answer the following tions. The market expects the ange rate for Guatemala to preciate by two percent. preciate by two percent. ay the same Increase. e do not have enough information.

rica. It has a fixed exchange rate with J.S. The Monetary base for Honduras O. Domestic Credit is 40. The interest s 0.04 while the interest rate in the s 0.04. There is an open capital et and relative PPP holds at all times. g the model and the assumptions loped in class, answer the following tions. The market expects the ange rate for Guatemala to preciate by two percent. preciate by two percent. ay the same Increase. e do not have enough information.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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