Suppose the demand for dollars (in exchange for euro) is given by the equation: D = 160 + 0.020Y(for) - 550 r(for) + 700r - 28 e(nom) The supply of dollars is given by: S = 80 + 0.022Y + 300r(for) - 640r + 24 e(nom) Suppose output and the real interest rate in the domestic country and the foreign country are: Y = 8,000, Y(for) = 9000, r = 0.060, r(for) = 0.040 Calculate the equilibrium value of the nominal exchange rate.
Suppose the demand for dollars (in exchange for euro) is given by the equation: D = 160 + 0.020Y(for) - 550 r(for) + 700r - 28 e(nom) The supply of dollars is given by: S = 80 + 0.022Y + 300r(for) - 640r + 24 e(nom) Suppose output and the real interest rate in the domestic country and the foreign country are: Y = 8,000, Y(for) = 9000, r = 0.060, r(for) = 0.040 Calculate the equilibrium value of the nominal exchange rate.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the demand for dollars (in exchange for euro) is given by the equation:
D = 160 + 0.020Y(for) - 550 r(for) + 700r - 28 e(nom)
The supply of dollars is given by:
S = 80 + 0.022Y + 300r(for) - 640r + 24 e(nom)
Suppose output and the real interest rate in the domestic country and the foreign country are:
Y = 8,000, Y(for) = 9000, r = 0.060, r(for) = 0.040
Calculate the equilibrium value of the nominal exchange rate. In your calculations, carry out your intermediate steps to three decimals and round your answer to three decimals.
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