Using a diagram for each situation, carefully illustrate the effects on the equilibrium exchange rate in Jamaica of the following events: (a) A decrease in the interest rate of Jamaica; will the Jamaican dollar depreciate or appreciate? Explain. (b) A recession in the US economy, which is a major trading, partner for Jamaica; will the Jamaican dollar depreciate or appreciate? Explain.

Using a diagram for each situation, carefully illustrate the effects on the equilibrium exchange rate in Jamaica of the following events: (a) A decrease in the interest rate of Jamaica; will the Jamaican dollar depreciate or appreciate? Explain. (b) A recession in the US economy, which is a major trading, partner for Jamaica; will the Jamaican dollar depreciate or appreciate? Explain.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

See similar textbooks

Similar questions

Draw and carefully label the Euro-U.S. dollar foreign exchange graph as discussed in the textbook.You must use the Euro/US $ exchange rate as your price variable. Assume we are currently in marketequilibrium. Illustrate using the graph how the equilibrium euro/dollar foreign exchange rate wouldbe affected by the following events, holding all else constant. Use a different graph for each part.Explain in words why the equilibrium exchange rate changed. Show an increase in US productivity relative to the Euro Area
Draw and carefully label the Euro-U.S. dollar foreign exchange graph. You must use the Euro/US $ exchange rate as your price variable. 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. Use a different graph for each part. Explain in words why the equilibrium exchange rate changed. An unexpected increase in the US inflation rate relative to the Euro Area.
Draw and carefully label the Euro-U.S. dollar foreign exchange graph. You must use the Euro/US $ exchange rate as your price variable. 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. Use a different graph for each part. Explain in words why the equilibrium exchange rate changed. a. An unexpected increase in US short-term interest rates while Euro interest rates were unchanged.
Draw and carefully label the Euro-U.S. dollar foreign exchange graph. You must use the Euro/US $ exchange rate as your price variable. 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. Use a different graph for each part. Explain in words why the equilibrium exchange rate changed.
what factors affect the equilibrium exchange rate in the foreign exchange market? use the appropriate graphical illustrations to analyze the impact of relative inflation rates and relative interest rates on the exchange rate for the birtish pound Sterling in terms of the US dollar. b. suppose the exchange rate for the Iraqi dinar moves from .00069 to .00072. which currency has appreciated and by what percentage? which currency depreciated and by what percentage?
(1) a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.72 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200 import good from Britain? d. How do these changes affect the economic welfare of U.S. exporters and U.S. importers? (2) Suppose that the euro (€) appreciates from $1.00 per €1 to $1.20 per €1. Determine whether the underlined individuals listed below would see that appreciation as a good or a bad thing. a. A U.S. business buys €10,000 of chemicals from a German company. b. An Italian clothing company buys $100,000 of leather from a U.S. leather maker. c. A U.S. resident has a retirement account totaling €500,000 in a German bank. d. A U.S. company must make an interest payment of €25,000 to the French bank from which it…
Initially, the exchange rate between Lebanon and Mexico is in equilibrium. Now, assume that there is a decrease in demand for Mexican pesos. As a result of this change, what will happen to Mexican pesos? an appreciation a depreciation no change Furthermore, a decrease in demand for Mexican pesos also results in winners and losers for various groups that are affected by the foreign exchange market. For the group in each example, indicate whether it is a winner or a loser in this change. ____ a tourist from Lebanon going on vacation to Mexico. ____ a mutual fund in Lebanon that purchases bonds in Mexico. ____ a family from Mexico visiting relatives in Lebanon. ____ a small firm in Mexico that sells DoDads in Lebanon. ____ a large firm in Lebanon selling chemicals in Mexico. ____ a multinational based in Mexico purchasing land in Lebanon. Answer Bank: winner, loser
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 a country imposes a tariff on imports from abroad. a. How does this action affect the country’s imports of foreign goods? b. How does this action affect the world relative demand for foreign goods and the relative demand for home goods? c. How does this action change the long-run real exchange rate between the home and foreign currencies? d. How is the long-run nominal exchange rate affected?
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.
a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200 import good from Britain? d. How do these changes affect the economic welfare of U.S. exporters and U.S. importers? 2. a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.72 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200…
a. Describe what is happening to the country’s capital account of the balance of payments prior to government changing its tack on supporting the value of the currency? Which items in the capital account are likely to change and how will they change? b. What is likely to happen to the country’s real exchange rate initially and after the government changes its policy stance with respect to supporting the currency? Please justify your answer. c. What happens to the current account balance right after the oil price shock and after the government stops supporting the currency? What items of the current account are likely to change and why? d. How is the market for non-tradables in the domestic economy affected in these two stages?