please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly Suppose that, initially, the foreign exchange market between the United States and Canada is in equilibrium. Suppose that incomes increase in theUnited States, causing U.S. consumers to purchase more goods and services made in Canada.Illustrate how this change affects the market for Canadian dollars 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 backto its original position, just drag it a little farther.U.S. DOLLARS PER CANADIAN DOLLARSupplyCANADIAN DOLLARSD₁DoDemand} 수SupplyThis change in the market for Canadian dollars causes the U.S. dollar toadvantage of this change in the demand for foreign currency for the United States?American consumers face higher prices on Canadian goods.American consumers face lower prices on Canadian goods.OU.S. exporting firms find it more difficult to compete in the Canadian market.against the Canadian dollar. Which of the following is an

Ans. ) Given, that initially, the foreign exchange market between the United States and Canada is in…

Answered: Suppose that, initially, the foreign…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the simultaneous equilibrium in the US money market and the foreign exchange market. In this problem we will analyze the effect of a decline in the future expected exchange rate (expected (E$/€), i.e. expected dollar appreciation. The figure on the right shows the return on dollar deposits as a function of the dollar/euro exchange rate E$/€. 1) Using the 3-point drawing tool, draw the line representing the dollar return on euro deposits. Label this line 'RET-€1'. 2) Using the 3-point drawing tool, draw a new line on the same graph representing the dollar return on euro deposits as the future expected exchange rate falls, and label it 'RET-€2'. Carefully follow the instructions above and only draw the required objects.
You have just been hired by the U.S. government to analyze the following scenario. Suppose the U.S. agricultural industry is concerned about the level of fruit and vegetable imports to the United States, a practice that hurts domestic producers. Lobbyists claim that implementing a quota on imports would shrink the size of the trade deficit. The following exercise will help you to analyze this claim. The following graph shows the demand and supply of U.S. dollars in a model of the foreign-currency exchange market. Given this change, the dollar (appreciate, depreciate) . Fill in the following table with the effect of a quota on the following items: Supply of Loanable Funds Real Interest Rate Domestic Investment Net Exports in crease, decrease, or no change increase, decrease or no change increase decrease or no change increase , decrease or no change
You have just been hired by the U.S. government to analyze the following scenario. Suppose the U.S. agricultural industry is concerned about the level of fruit and vegetable imports to the United States, a practice that hurts domestic producers. Lobbyists claim that implementing a tariff on imports would shrink the size of the trade deficit. The following exercise will help you to analyze this claim. The following graph shows the demand and supply of U.S. dollars in a model of the foreign-currency exchange market. Shift the demand curve, the supply curve, or both to show what would happen if the government decided to implement the tariff. Given this change, the dollar_______ (appreciates/depreciates). Fill in the following table with the effect of a tariff on the following items:
The following questions focus on the exchange rate between the euro and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of euros you must pay for one krone. Suppose an economic downturn in Denmark causes Danish incomes to decrease, while European incomes remain unchanged. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Supply of Kroner Demand for Kroner Supply of Kroner Demand for Kroner QUANTITY OF KRONER The decrease in Danish incomes causes the Danish krone to relative to the euro and causes the euro to relative to the Danish krone. Suppose the price level in the euro zone rises by 12%, while the price level in Denmark remains the same. That is, the inflation rate in the euro zone is higher than in Denmark. EUROS PRICE OF KRONER
The figure to the right shows the market for Kuwait's currency, the dinar. Suppose that the following two events take place in the market for the dinar: The U.S. demand for oil, Kuwait's main export good, declines and market interest rates on financial assets denominated in dinar decrease relative to U.S. interest rates. Moreover, assume that exchange rates are flexible. Using the line drawing tool, show how the market for the dinar is impacted by these events Properly label this line, Carefully follow the instructions above, and only draw the required objects. According to your graph, the dinar has with respect to the dollar. Dollars per Dinar 6.0 5.5 5.0 4.5 4.0 3.5- 3.0 2.5 2.0 1.5- 1.0 0.5- 0.0+ 0 1 2 6 Quantity of Dinars (billions) 8 9 D S 10 Ly
Suppose a currency is temporarily undervalued by a fixed exchange rate system, such as the international gold standard. Let that currency be the US dollar, and expressed in terms of British pounds. First show this disequilibrium using a supply and demand graph and then Clearly explain how one could profit by arbitraging in dollars using a bill of exchange.
RUBLES PER KRONE RUBLES PER KRONE 3. Changes in the foreign exchange market The following questions focus on the exchange rate between the Russian ruble and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of rubles you must pay for one krone. Suppose a recession in Russia causes Russian incomes to decrease, while incomes in Denmark remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drap 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 of Kraner Demand for Kraner Demand for Kroner QUANTITY OF KRONER Supply of Kroner ? The decrease in Russian Incomes causes the Danish krone to relative to the Danish krone. relative to the Russian ruble and causes the Russian…
Consider the exchange rate between Jamaica and Tunisia. Typically, exchange rates vary over time, sometimes quite dramatically. The scenarios present various changes that may affect the exchange rate. Indicate whether each scenario will tend to cause an appreciation or depreciation of, or have no effect on, the value of Jamaican dollars relative to Tunisian dinars. The magazine The Economist publishes an article indicating that analysts expect the value of Tunisian dinars to rise relative to Jamaican dollars. The central bank in Jamaica announces that it will raise interest rates on government bonds. Based on a World Bank report, the inflation rate in Jamaica will be 1% next year, whereas the inflation rate in Tunisia will be 10.5%. The price of a specific basket of goods in Jamaica is roughly 2.0 times higher than the price of an identical basket of goods in Tunisia, even after adjusting for the exchange rate. Answer Bank appreciate no effect depreciate
You are going to Japan on an exchange trip in a few months and need to turn your dollars into the Japanese currency, the yen. Right now the exchange rate is $1 = 105 yen, but you expect the dollar to appreciate next month and it should be valued at $1= 107 yen. If you exchange $200 for yen today, how many yen will you receive? Explain. If you decide to wait and exchange your dollars when they are worth $1= 107 yen, how many yen will you receive? Explain. Based on this information, should you exchange your money now or wait a few months? Explain.
An exchange rate is the domestic price to purchase one unit of a foreign currency. For example, how much does it cost in Canadian dollars to buy one US dollar? There are various economic theories to predict exchange rates. The simplest theory is known as the Law of One Price or also known as Absolute Purchasing Power Parity (PPP). Use absolute PPP and the price of a Big Mac in different countries to complete the table below and to predict whether the local currency is over or undervalued compared to the US dollar. Country USA Canada Saudi Arabia Brazil Italy Source: The Economist Big Mac Price in Local Currency $4.62 $5.54 SR 10 R$ 12 €3.75 Current Market Exchange Rate e 1.10 3.75 2.27 0.74 Exchange Rate Predicted by PPP and Big Mac ê According to the table above, an arbitrageur in Brazil could make money by If the Big Mac Index were accurate for other tradeable goods and services, Brazil's AD curve would O Local Currency should... the US. 수 + 8°C. Clou
Suppose the following graph shows what prevailed on the foreign exchange market in 2015 with floating exchange rates. Suppose the following event occurs: U.S. interest rates are higher relative to British rates 1.) Using the line drawing tool, draw a new line that reflects the change in demand. Label your line 'New Line'. Carefully follow the instructions above and only draw the required object. - Price of dollars per pound $1.60 :E* Quantity of pounds S D
U.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…

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