Krugman's Economics For The Ap® Course
3rd Edition
ISBN: 9781319113278
Author: David Anderson, Margaret Ray
Publisher: Worth Publishers
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Question
Chapter 8R, Problem 1FRQ
a.
To determine
To draw: The graph showing the equilibrium in US foreign exchange market for the Chinese Yuan. Also, determine the impact on demand for the Chinese Yuan and the value of the Chinese Yuan relative to the US dollar if the real interest rate falls equivalent to US real rate.
a.
Expert Solution
Explanation of Solution
Calculation:
Graph showing equilibrium in the US foreign exchange market which is as follows:
Graph 1
If the interest rate is decreasing, then the demand for the Chinese Yuan will increase as investment rates are reduced which will allow the Chinese Yuan to move to the US.
ii)
The value of the Chinese Yuan is
Economics Concept Introduction
Foreign Exchange rate: The rate at which currencies of two different countries are exchanged. In other words, it is the rate at which one currency is exchanged with the other currency.
b.
To determine
To show: The effect of change in the value of Chinese Yuan in the US current account balance.
b.
Expert Solution
Explanation of Solution
When the value of the Chinese Yuan is depreciating then imports from China to the US will increase. This increase in imports will increase the current account balance of the US.
Economics Concept Introduction
Foreign Exchange rate: The rate at which currencies of two different countries are exchanged. In other words, it is the rate at which one currency is exchanged with the other currency.
Chapter 8R Solutions
Krugman's Economics For The Ap® Course
Ch. 8R - Prob. 1MCQCh. 8R - Prob. 2MCQCh. 8R - Prob. 3MCQCh. 8R - Prob. 4MCQCh. 8R - Prob. 5MCQCh. 8R - Prob. 6MCQCh. 8R - Prob. 7MCQCh. 8R - Prob. 8MCQCh. 8R - Prob. 9MCQCh. 8R - Prob. 10MCQ
Ch. 8R - Prob. 11MCQCh. 8R - Prob. 12MCQCh. 8R - Prob. 13MCQCh. 8R - Prob. 14MCQCh. 8R - Prob. 15MCQCh. 8R - Prob. 16MCQCh. 8R - Prob. 17MCQCh. 8R - Prob. 18MCQCh. 8R - Prob. 19MCQCh. 8R - Prob. 20MCQCh. 8R - Prob. 21MCQCh. 8R - Prob. 22MCQCh. 8R - Prob. 23MCQCh. 8R - Prob. 24MCQCh. 8R - Prob. 25MCQCh. 8R - Prob. 1FRQCh. 8R - Prob. 2FRQCh. 8R - Prob. 3FRQCh. 8R - Prob. 2CTQCh. 8R - Prob. 3CTQ
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