The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

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Answer 1

Question

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

Answer 6

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

Answer 7

Chapter 19, Problem 1QR

To determine

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Answer 8

Expert Solution & Answer

Explanation of Solution

The foreign exchange market is the place of market where the participants are able to buy and sell different foreign currencies with exchange to the domestic currency. Here, the lonable fund interest rate theory applies. The lonable fund includes all the forms of credit of the economy, which includes the loans, bonds, and the savings deposits.

The lonable fund supply is from the national savings of the economy. The national savings of the economy is the summation of the private savings and the government savings of the economy. This together forms the national savings, which forms the supply base of the lonable funds. The demand for the lonable funds arises from the domestic investors as well as the net capital outflow, which requires the lonable funds to meet them.

The supply of the foreign currency emerges from the net capital outflows of the economy, whereas the demand for the foreign currency exchange comes from the net exports of the economy. Thus, the link between the lonable fund market and the foreign exchange market is nothing else than the net capital outflow.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Concept introduction:

Lonable funds: The term “lonable funds” includes all forms of the credit in the economy such as the savings deposits, loans, and the bonds, etc.

Foreign exchange market: The market that is meant for buying and selling of the foreign currencies and the domestic currencies in exchange.

Answer 12

Ch. 19.1 - Prob. 1QQ Ch. 19.2 - Prob. 2QQ Ch. 19.3 - Prob. 3QQ Ch. 19 - Prob. 1QR Ch. 19 - Prob. 2QR Ch. 19 - Prob. 3QR Ch. 19 - Prob. 4QR Ch. 19 - Prob. 1QCMC Ch. 19 - Prob. 2QCMC Ch. 19 - Prob. 3QCMC

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Solution Summary: The author explains the lonable fund interest rate theory and the link between the two markets.

The supply and demand for lonable funds in the foreign exchange market and the link between the two markets.

Explanation of Solution

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