Appreciation of Currency: It is referred to as the rise in the value of currency in comparison to other currencies. Consider a situation in which value of one dollar is equal to INR 50. When it becomes equal to INR 60, it means dollar has appreciated in comparison to INR. Depreciation of Currency: It is referred to as the reduction in the value of currency in comparison to other currencies. Consider a situation in which value of one dollar is equal to INR 50. When it becomes equal to INR 40, it means dollar has depreciated in comparison to INR. Equilibrium in Exchange Market: It is the point where demand for a currency is equal to supply of currency in the exchange market. Under fixed exchange rate government intervention ensures such point. Fixed Exchange Rate: Exchange rate system under which there is intervention by the government to control the fluctuation is known as fixed exchange rate. Nominal Exchange Rate: The rate at which currencies are exchanged in the exchange market is known as nominal exchange rate. Flexible Exchange Rate: Exchange rate system under which there is no intervention by government rather the rate is determined from demand and supply phenomenon.

Question

Want to see the full answer?

Answer 1

Question

Chapter 33, Problem 9P

To determine

Concept Introduction:

Appreciation of Currency: It is referred to as the rise in the value of currency in comparison to other currencies. Consider a situation in which value of one dollar is equal to INR 50. When it becomes equal to INR 60, it means dollar has appreciated in comparison to INR.

Depreciation of Currency: It is referred to as the reduction in the value of currency in comparison to other currencies. Consider a situation in which value of one dollar is equal to INR 50. When it becomes equal to INR 40, it means dollar has depreciated in comparison to INR.

Equilibrium in Exchange Market: It is the point where demand for a currency is equal to supply of currency in the exchange market. Under fixed exchange rate government intervention ensures such point.

Fixed Exchange Rate: Exchange rate system under which there is intervention by the government to control the fluctuation is known as fixed exchange rate.

Nominal Exchange Rate: The rate at which currencies are exchanged in the exchange market is known as nominal exchange rate.

Flexible Exchange Rate: Exchange rate system under which there is no intervention by government rather the rate is determined from demand and supply phenomenon.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

After the ban is imposed, Joe’s firm switches to the more expensive biodegradable disposable cups. This increases the cost associated with each cup of coffee it produces. Which cost curve(s) will be impacted by the use of the more expensive biodegradable disposable cups? Why? Which cost curve(s) will not shift, and why not? Please use the table below to answer this question. For the second column (“Impacted? If so, how?”), please use one of the following three choices: No shift; Shifts up (i.e., increases: at nearly any given quantity, the cost goes up); or Shifts down (i.e., decreases: at nearly any given quantity, the cost goes down). $ Cost Curve Impacted? If so, how? Explanation of the Shift: Why or Why Not AFC No shift. Fix costs stay the same, regardless of quantity. Fixed cost is calculated as Fixed Cost/Quantity. Since fixed costs remain unchanged, AFC stays the same for each quantity. MC Shifts up. Since the biodegradable cups are more expensive, the…

Styrofoam is non-biodegradable and is not easily recyclable. Many cities and at least one state have enacted laws that ban the use of polystyrene containers. These locales understand that banning these containers will force many businesses to turn to other more expensive forms of packaging and cups, but argue the ban is environmentally important. Shane owns a firm with a conventional production function resulting in U-shaped ATC, AVC, and MC curves. Shane's business sells takeout food and drinks that are currently packaged in styrofoam containers and cups. Graph the short-run AFC0, AVC0, ATC0, and MC0 curves for Shane's firm before the ban on using styrofoam containers.

d-f