Which of the following news headlines is most likely to strengthen a country's currency in the short-term? "Political Instability Mounts with Protests and Demonstrations" "Trade Surplus Reaches Record High, Exceeding Expectations" "Fitch Upgrades Country's Credit Rating to AAA"
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- Consider the supply-demand framework for the British pound relative to the U.S. dollar shown in the following chart. The exchange rate is currently $180-$1,00. Which of the following is correct? Dollar price per pound (exchange rate) $1.90 $1.80You work for a Nova Scotia Company trying to successfully enter the cranberry market in Australia. Analyze the entry country (Australia) based on the following; What are the major exports, dollar value, and trends? What are the major imports, dollar value, and trends? Does the entry country have a surplus or deficit for trade? What are the exchange rates? Are there any restrictions on currency trade? You should also consider sweat shops, skilled labor, employee unrest, political and social activists and labor unions in your analysis.Suppose that the U.S. dollar-Chinese yuan exchange rate is fixed by the U.S. and Chinese governments. Assume also that labor is immobile between the United States and China due to high transportation costs. Which of the following situations is likely to occur if there is a simultaneous increase in the demand for U.S. goods and a decrease in the demand for Chinese goods? a) The Chinese unemployment rate will increase, and the country will undergo hard economic times for a sustained period. b) The U.S. unemployment rate will increase, and the country will undergo hard economic times for a sustained period. c) The Chinese unemployment rate will initially rise but then drop as the Chinese yuan depreciates against the U.S. dollar. d) The Chinese unemployment rate will initially rise but soon drop as unemployed Chinese move to the United States for employment.
- Draw and Label the FX Market diagram (spot exange rate on x-axis, and expected return on y-axis) for the relationship between the US Dollar and the UK Pound. Make the Dollar the domestic currency and the Pound the foreign currency. Then show how the equilibrium exchange rate changes when: The Bank of England raises short-term interest rates in the UK. The British people vote to leave the EU (Brexit). (Pretend it has not happened yet) The US expected inflation rate rises.Country Z has a fixed exchange rate policy and its own currency. Country Z experienced an inflation rate of 27% in the past year, whereas a weighted price index for its trading partners has only risen by a rate of 3%. In the previous year, country Z had a relatively balanced current account. The Central Bank of Country Z decided to devalue its nominal exchange rate by 20%. Assuming that Country Z experienced no significant external shocks during the year and did not introduce any changes in its trade policies, will country Z’s exchange rate be overvalued or undervalued this year after this nominal devaluation? Will that lead the current account balance to change? In which direction is it likely to change?Variations in the foreign exchange rate can impact on the profitability of business. Explain what determines the foreign currency exchange rates.
- Jamaica's current account averaged US$-65.94M from 1987 until 2020, reaching an all-time high of US$153.47M in the first quarter of 2016 and a record low of US$-536.06M in the third quarter of 2012. The country recorded a current account surplus of US$53.64M in the fourth quarter of 2020. At present, Jamaica ranks 83rd out of a group of 172 countries being tracked by the World Bank in terms of current account balance. This is 27 places above the position seen 10 years ago. The current account is one of two primary components of the balance of payments. As a per cent of GDP, it provides an indication of the level of international competitiveness of a country. Usually, countries recording a strong current account surplus have economies which are heavily dependent upon exports revenues and have high savings ratings but weak domestic demand. On the other hand, countries recording a current account deficit have strong imports, low saving rates and high personal consumption rates as a…11. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table forecasts nominal exchange rate data for February 1, 2019, in terms of Canadian dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Foreign Currency United States dollar (USD). euro (EUR) Japanese yen (JPY) Mexican peso (MXN) United Kingdom pound (GBP) Cost of One Unit of Foreign Currency (Dollars) 1.31 1.50 0.012 0.068 1.72 Source: "Bank of Canada," https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates/. Suppose that on February 1, 2019, a marble statue handmade in Mexico is priced at 20,000 MXN. The approximate Canadian dollar price of the statue would beA government wants to reduce both the country’s inflation rate and its current account surplus. What could be an appropriate government measure to achieve these objectives? Pick a,b,c, or d A) decrease tariffs on imports B) increase the exchange rate C) increase income tax D) devalue the currency
- On June 1, 2016, the exchange rate for U.S. dollars and euros was approximately $1.00 = €0.90, as shown in the market for U.S. dollars below. Suppose the interest rate is expected to fall in the European Union (relative to the interest rate in the U.S.). How will this affect the value of the dollar relative to the euro? Exchange Rate (€/S) 0.9 Quantity of Dollars Traded. D₁ S₁The Big Mac index was introduced by The Economist magazine in 1986, as a playful example to introduce the concept of purchase power parity (PPP) and under/overvaluation of currencies. The PPP rates are usually compiled based on consumer baskets of comparable quality. The problem is that goods in different economies are hardly comparable. The customer basket contains only one good which is made everywhere in exactly the same way – McDonald’s Big Mac. You might think that is an oversimplification, but in fact the Big Mac Index has been widely used for comparing currencies ever since it was first published. Explore the concept behind the Big Mac index and critically assess the importance of comparability of goods in various economies.How does the fluctuating value of the Euro affect the price of German cars sold in the United States?