Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 13, Problem 3QQ
To determine
The impact of import restriction on the value of currency and exports.
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Students have asked these similar questions
Suppose there is a country “A", the currency of
A is "X".
Suppose that for some reason, the world's
import demand for country A's products
increases.
Please use use the chart to analyze how the
exchange rate of X moves to the long-term
equilibrium.
It is often believed that the value of the currency of some countries are too low, which gives the firms in those countries an unfair competitive advantage. Econometric
evidence indicates that relative PPP does not hold in the short-run, while it does hold in the long-run.
a. What does this imply for countries with a fixed exchange rate that is 'unfairly low'?
b. Can a country maintain an 'unfair' competitive advantage in the long-run by somehow manipulating its exchange rate? Explain.
c. Assume the UK and the US are the only countries in the world. Explain what will happen in the long run to the pound and the nominal interest rate in the UK as
a result of a decrease in the expected inflation rate in the UK..
Assume that the current Yen/Dollar exchange
rate is one Dollar equals 100 Yen. Using a
graph show and explain how the Yen/Dollar
exchange rate would be affected by each of
the following events. In each case, assume
ceteris paribus conditions.
A. A sharp rise in U.S. interest rates.
3. The appearance of double-digit inflation in
Japan.
C. A significant increase in U.S. GDP growth
outstripping Japanese growth.
D. A 20% increase in the U.S. money supply
Please use graph and provide explanations
for each of the above: A, B, C, and D. Thank
you!
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