MANKIW: PRINCIPLES OF MACROECONOMICS
8th Edition
ISBN: 9781337801782
Author: Mankiw
Publisher: CENGAGE L
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Chapter 18.3, Problem 3QQ
To determine
Effect of inflation on exchange rate.
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Over the past 20 years , Mexico has had high inflation and Japan has had low inflation.What do you predict has happened to the number of Mexican pesos a person can buy with a Japanese yen?
Over the past 20 years, Brazil has experienced relatively high inflation while Japan has experienced relatively low inflation. What do you think has happened to the number of Brazilian reais a person can buy with a Japanese yen?
Some countries, many being developing countries, peg their currency to the US dollar. What effect does a rapid appreciation or devaluation of the dollar have on those countries? If you were an exporter from an emerging country to the United States would you prefer a strong or weak dollar?
Chapter 18 Solutions
MANKIW: PRINCIPLES OF MACROECONOMICS
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- You are going to Japan on an exchange trip in a few months and need to turn your dollars into the Japanese currency, the yen. Right now the exchange rate is $1 = 105 yen, but you expect the dollar to appreciate next month and it should be valued at $1= 107 yen. If you exchange $200 for yen today, how many yen will you receive? Explain. If you decide to wait and exchange your dollars when they are worth $1= 107 yen, how many yen will you receive? Explain. Based on this information, should you exchange your money now or wait a few months? Explain.arrow_forwardPanama uses the USD as their official currency since 1903 because their own peso was highly volatile, subject to high and unstable inflation. True ☐False ☐Defend your answerarrow_forwardIn mid-2006, a British pound sterling (the monetary unit in the United Kingdom) was worth 1.4 euros (the monetary unit in the European Union). If a U.S. dollar bought 0.55 pound sterling in 2006, what was the exchange rate between the U.S. dollar and the euro?arrow_forward
- What is the current (within the last 48 hours) exchange rate between the U.S. dollar and the Chinese Yuan?arrow_forwardThe difference between the amount we spend to import products from other countries and the amount we make when we export products to other countries is called the balance of trade. Why would the balance of trade affect the value of the US dollar? Is it better to import more or to export more? Why?arrow_forwardWhat happens to the exchange rate of a country’s currency when that country experiences high levels of inflation for an extended period of time? How will it affect the flow of that country’s currency in and out of the country? Explain your answers.arrow_forward
- If $1 USD = $1.09 CAD (Canadian dollar), which country has a stronger currency today? How do you know that it is stronger? What do we mean when we say that a currency is strong?arrow_forwardIf Japan has low inflation and the Philippines has high inflation, what will happen to the exchange between the Japanese yen and the Philippine peso?arrow_forwardIf the Fed started printing large quantities ofU.S. dollars, what would happen to the numberof Japanese yen a dollar could buy? Whyarrow_forward
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