PRINC OF ECONOMICS PKG >CUSTOM<
7th Edition
ISBN: 9781305018549
Author: Mankiw
Publisher: CENGAGE C
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Question
Chapter 32, Problem 5PA
Subpart (a):
To determine
The impact of new taste of wine developed.
Subpart (b):
To determine
The impact of new taste of wine developed.
Subpart (c):
To determine
The impact of new taste of wine developed.
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Suppose the French suddenly develop a strong taste for California wines. Answer the
following questions in words and with a diagram.
a. What happens to the demand for dollars in the market for foreign-currency exchange?
b. What happens to the value of the dollar in the market for foreign-currency exchange?
What happens to U.S. net exports?
с.
How would I find the actual exchange rate to answer the bottom part of the data shown.
If there is a decrease in the desire of foreigners to purchase goods and services from the United States and a lower desire to invest in U.S. banks and businesses, then how would this affect the U.S. foreign exchange market?
A. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would depreciate.
B. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would appreciate.
C. The equilibrium quantity of foreign currency would increase and the U.S. dollar would depreciate.
D. The equilibrium quantity of foreign currency would increase and the U.S. dollar would appreciate.
Chapter 32 Solutions
PRINC OF ECONOMICS PKG >CUSTOM<
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Similar questions
- In 2001, the United Kingdoms economy exported goods worth 192 billion and services worth another 77 billion. It imported goods worth 225 billion and services worth £66 billion. Receipts of income from abroad were 140 billion while income payments going abroad were 131 billion. Government transfers from the United Kingdom to the rest of the world were 23 billion, while various U.K government agencies received payments of 16 billion from the rest of the world. Calculate the U.K. merchandise trade deficit for 2001. Calculate the current account balance for 2001. Explain how you decided whether payments on foreign investment and government transfers counted on the positive or the negative side of the current account balance for the United Kingdom in 2001.arrow_forwardUsing the concept of "carry trade," explain how a decrease in U.S. interest rates could affect the EUR/USD exchange rate. Given this change in exchange rate, how would firms and customers be affected? professors note Supply and demand for currencies can be tricky, not least due to the confusing idea that what we are buying or selling is money itself! Once you can wrap your mind around the idea that money is what is being obtained for other money, the next set of questions relates to what would or could make the price of one money change in terms of another. To this effect, I'd recommend a primer from Investopedia: Six Factors That Influence Exchange Rates. For your consideration in responding to this post, I suggest reading on how the Carry Trade has the capacity to magnify systemic risk.arrow_forwardU.S. DOLLARS PER POUND 1. Equilibrium rate of exchange Suppose that, initially, the foreign exchange market between the United States and Great Britain is in equilibrium. Suppose that preferences for goods made in Great Britain change in the United States, causing U.S. consumers to purchase fewer goods and services made in Great Britain. Illustrate how this change affects the market for pounds by shifting one or both of the curves on the following graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply Demand --- Supply K POUNDS Demand This change in the market for pounds causes the U.S. dollar to change in the demand for foreign currency for the United States? O U.S. firms face less pressure to keep prices low. O U.S. inflation is higher due to higher prices on British goods. O U.S. inflation is lower due to lower…arrow_forward
- View the data below for the exchange rate between the US dollar and the Japanese yen. How many yen could you get per dollar at the earliest date shown on the chart? Explain. How many yen could you get per dollar at the most recent date shown on the chart? Explain. Has the dollar appreciated or depreciated in value over time? Explain.arrow_forwardWhich of the following affects the demand for U.S. dollars in the foreign exchange market? Multiple Choice domestic demand for U.S. stocks domestic demand for U.S.-made cars foreign demand for U.S. exports European demand for eurosarrow_forwardThe following graph depicts the foreign exchange market for euros. The blue line represents the demand schedule for euros, while the orange line represents the euro supply schedule. Suppose that real interest rates in France suddenly increase, while real interest rates in the United States remain stable. Use the graph to shift either the supply schedule, the demand schedule, or both, to depict the impact on the value of the euro. Then answer the question that follows. D QUANTITY OF EUROS As a result of this, the value of the euro is expected top VALUE OF EURO (U.S. dollars per euro)arrow_forward
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