Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) toshow the supply curve after the budget deficit.REAL EXCHANGE RATE-20-15Market for Foreign-Currency Exchange108Effects of a Budget Deficit2Demand100-10 -5 0 5QUANTITY OF DOLLARS (Billions)1520Summarize the effects of a budget deficit by filling in the following table.Initial SupplySupply with Deficit?Real Interest Rate Real Exchange Rate Trade Balance On the following graph, plot the relationship between the real interest rate and net capital outflow by using the green points (triangle symbol) to plotthe points from the initial data table. Then use the black point (X symbol) to indicate the level of net capital outflow at the equilibrium real interestrate you derived in the previous graph.REAL INTEREST RATENet Capital Outflow108▲ 60-20 -15 -10 -5 05 10NET CAPITAL OUTFLOW (Billions of dollars)1520NCOEqm. NCOBecause of the relationship between net capital outflow and net exports, the level of net capital outflow at the equilibrium real interest rate impliesthat the economy is experiencing balanced tradeNow, suppose the government is experiencing a budget deficit. This means thatloanable funds.After the budget deficit occurs, suppose the new equilibrium real interest rate iscurrency exchange market.Use the green line (triangle symbol) to show the supply curve in this market befshow the supply curve after the budget deficit.national saving will increasenational saving will decreasedomestic investment will increasedomestic investment will decreasewhich leads toemand curve in the foreign-purple line (diamond symbol) to

International Capital mobility is a very common phenomena which occurs in these times of globalized…

Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) to show the supply curve after the budget deficit. EXCHANGE RATE Market for Foreign-Currency Exchange 10 8 Initial Supply Supply with Deficit ?

Use the green line (triangle symbol) to show the supply curve in this market before the budget deficit. Then use the purple line (diamond symbol) to show the supply curve after the budget deficit. EXCHANGE RATE Market for Foreign-Currency Exchange 10 8 Initial Supply Supply with Deficit ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Other things the same, if the U.S. price level falls, then Answer the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate rises. the supply of dollars in the market for foreign-currency exchange increases, so the exchange rate falls. the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate rises. the supply of dollars in the market for foreign-currency exchange decreases, so the exchange rate falls.
The current exchange rate is $1.00 = 1.50 Swiss franc. The exchange rate is expected to be $1.00 = 1.25 Swiss franc in six months. The U.S. dollar is expected to A. depreciate and the U.S. will import more from Switzerland B. appreciate and the U.S. will export more to Switzerland C. appreciate and the U.S. will import more from Switzerland D. depreciate and the U.S. will export more to Switzerland
QUESTION 22 3 pol Suppose that • The Elasticity of Imports in the USA in the short Run is 0.5 • The Elasticity of Imports in Japan in the short Run is 0.6 • The Elasticity of Imports in the USA in the long Run is 0.9 The Elasticity of Imports in the Japan in the long Run is 1 According to the Elasticities approach to the Current Account Balance, if the Exchange Rate goes from Yen=$1/100 to Yen $1/50 . O The Current Account Balance will be unchanged • The Current Account Balance in the US will deteriorate in the short run, and improve in the long run O The Current Account Balance in the US will deteriorate in the short run and in the long run O The Current Account Balance in the US will improve both in the short run and in the long run
Suppose we are in Balance of Payment equilibrium with a trade deficit of 300. What happens to the trade deficit if the public sector sells 100 in securities to the foreign sector to finance the budget deficit?
Using Demand and Supply Analysis. Use the line drawing tool to show the effects of an increase in Japanese interest rates on the exchange rate between the British pound and the Japanese yen. ¥ The vertical axis will be yen per pound, I Draw and properly label a single line. Carefully follow the instructions above, and only draw the required object. 400- 350- 300- 250- 200- 150- 100- 50- The Market for Pounds Yen per Pound A Pounds SE DE Q
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a. In the diagram, shift the relevant curve(s) to the show the long-run effect of an increase in the trade deficit, if the accompanying capital account surplus supports investment. Price level LRAS AS X AD Price level GDP b. In the diagram, shift the relevant curve(s) to the show the long-run effect of an increase in the trade deficit, if the accompanying capital account surplus supports consumption. LRAS AS X AD GDP
II. Trade Accounts. A. The Balance on Goods and Services has been in deficit for years. Assume the U.S. has $400 of goods and services exports. Use a simple flow of trade diagram to illustrate a U.S. Balance on Goods and Services deficit of $50. Foreign. U.S. B. I have argued that the illustration above is incomplete because it requires foreigners to hold American dollars for years and years. This seems unlikely. Use another flow of trade diagram to show how a deficit in the Balance of Goods and Services can be offset somewhere else in the trade accounts. U.S. Foreign. C. A Canadian furniture maker with plants in Canada and the United States, sells $100,000 worth of furniture made in Canada to Americans. They use the money from the sale to purchase $100,000 worth of furniture quality lumber from American suppliers to be used in their Canadian plant. How do these two transactions affect the Balance on Goods and Services? Give a number D. A Canadian furniture maker with plants in…
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The exchange rate between the United States dollar and the Japanese yen is determined in a flexible foreign exchange market. A. Assume that Japan is currently in a recession. What fiscal policy action could the Japanese government take to eliminate the recession? B. What would be the effect of the fiscal policy action identified in Part A on interest rates in Japan? C. Draw a correctly labeled graph of the foreign exchange market for the United States dollar. Show on your graph the impact of the change in interest rates identified in Part B on each of the following: i. The supply of United States dollars i. The equilibrium exchange rate of the United States dollar D. What would be the effect of the change in the exchange rate identified in Part Cil on United States imports? E. What would be the effect of the change in United States exports identified in Part D on United States unemployment?
2. The Table gives some information about Canada's international transactions in 2010. Item Billions of dollars. Imports of goods and services Net foreign investment in Canada Exports of goods and services. Net interest income. Net transfers Statistical discrepancy 508 54 476 16 (-3) 1 (a) Calculate the balance on the three balance of payments accounts. (b) Was Canada a net borrower or a net lender in 2010? Explain your answer.
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