Macroeconomics
Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 26, Problem 1SPA
To determine

Identify Country U’s dollar depreciate or appreciate against Country C’s dollar and Country U’s dollar appreciate or depreciate against the yen.

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Explanation of Solution

Country U’s dollar exchange rate increased from $1.24 to 1.29 against Country C’s dollar that means the value of Country U’s dollar increases, which implies the appreciation of Country U’s dollar against Country C’s dollar.

Country U’s dollar exchange rate that decreased from 121 to 108 against the yen means the value of the dollar decreases, which implies the depreciation of Country U’s dollar against the yen.

Economics Concept Introduction

Appreciation of currency: The appreciation of currency refers to increase in the international value of the currency with respect to other currency in the exchange market, which causes increase in the value of a currency against the other currency.

Currency depreciation: The currency depreciation is the fall in the value of the domestic currency relative to the foreign currency, which in turn reduces the value of currency against the other currency.

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5. Download the Excel sheet from Brightspace. The data contains the GDP per capita and GNI per capita of OECD member countries in 2014 (both figures are reported in US dollars). The countries are ranked by GDP per capita. a. Compute the ratio of GNI to GDP for each country (GNI per capita/GDP per capita). What does this imply about net factor income from abroad for each country? b. Rank the countries based on the GNI/GDP ratio, starting with the country with the highest ratio and ending with the country with the lowest ratio. Which country has the highest ratio, and which has the lowest? c. Comment on why the countries you identified in the previous question have a large difference between GDP and GNI? What does the difference imply?
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