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survey of economics
Questions and Answers of
Survey Of Economics
=+exchange rate, which nation’s goods become more attractive?
=+trading nations in the world. Given inflation and the change in the nominal
=+g. In each of the following scenarios, suppose that the two nations are the only
=+‘Dota fom: Federal Reserve Bank of St.Louis
=+xchange rate (ores per Prexing
=+ Is the movement of the exchange rate over the period January 2001 to November 2004 consistent with the movement in funds predicted in part a?
=+b. The accompanying diagram shows the exchange rate between the euro and the US. dollar from January 1, 2001, through September 2008.
=+ would you have expected funds to flow from the United States to Europe or from Europe to the United States over this period?
=+a. Considering the change in interest rates over the period and using the loanable funds model,
=+are listed in the table in Problem 6. 8. In January 2001, the U.S. federal funds rate was 6.5%, falling to 2% in November 2004. During the same period, the marginal lending rate at the European
=+the Japanese yen (JPY), the euro (EUR), and the Swiss franc (CHE) have appreciated or depreciated against the U.S. dollar (USD) since April 1, 2017. The exchange rates on April 1, 2017
=+7. Go to http://fx.sauder.ube.ca. Using the table labeled “The Most Recent Cross- Rates of Major Currencies,” determine whether the British pound (GBP), the Canadian dollar (CAD),
=+112.09 Japanese yen to bu |111.39 Japanese yen to buy yussi USS1 USS114 to buy 1 euro USS1.07 to buy 1 euro 0.96 Swiss franc to buy U |1.00 Swiss franc to buy US S$1 $1
=+April, 2016 April, 2017 USS1.42 to buy 1 British p | US$1.25 to buy 1 British p ound sterling ound sterling 32.26 Taiwan dollars tob | 30.40 Taiwan dollars to b uy USS1 uy USS1 USS0.77 to buy
=+the movement in the value of the U.S. dollar make American goods and services more or less attractive to foreigners?
=+6. Based on the exchange rates for the trading days of 2016 and 2017 shown in the accompanying table, did the U.S. dollar appreciate or depreciate over the year? Did
=+ab o 200 300 400 500 600 700 800 900 3,000 Quantity of loanable funds
=+explain how the demand and supply of loanable funds, the interest rate, and the balance of payments on current and financial accounts will change in each country if international capital flows are
=+ 5. Suppose that Northlandia and Southlandia are the only two trading countries in the world, that each nation runs a balance of payments on both current and financial accounts equal to zero, and
=+What was the value of its imports?
=+What was its balance of payments on current account?
=+What was Popania’s balance of payments on financial account in 2016?
=+ 4. In the economy of Popania in 2016, total Popanian purchases of assets in the rest of the world equaled $300 billion, purchases of Popanian assets by the rest of the world equaled $400 billion,
=+ What was the value of Scottopia’s purchases of assets from the rest of the world?
=+ What was the balance of payments on financial account?
=+ What was the balance of payments on current account in Scottopia?
=+What was the merchandise trade balance for Scottopia?
=+services, and the rest of the world purchased $250 billion of Scottopia’s assets.
=+3. In the economy of Scottopia in 2016, exports equaled $400 billion of goods and $300 billion of services, imports equaled $500 billion of goods and $350 billion of
=+b. Does this diagram indicate that world economies were more tightly linked in 2016 than they were in 1980?
=+a. As U.S.-owned assets abroad increased as a percentage of foreign GDP, does this mean that the United States, over the period, experienced net capital outflows?
=+\ s-ommed sss aood PSK EL EES SF Data rom: MF; Bureau of Economic Analyst.
=+Percent of rest-o-the-worl ‘CoP Foveign-owned cssets in the United States N a
=+ 2. The accompanying diagram shows foreign-owned assets in the United States and U.S.-owned assets abroad, both as a percentage of foreign GDP. As you can see from the diagram, both increased
=+ @. An American charity sends $100,000 to Africa to help local residents buy food after a harvest shortfall.
=+c. An American buys a bond from a Japanese company for $10,000.
=+a Paris bank, into her San Francisco bank.
=+b. An American who works for a French company deposits her paycheck, drawn on
=+a. A French importer buys a case of California wine for $500.
=+ How will the balance of payments on the current and financial accounts change?
=+to or from a foreigner) or the financial account (as a sale of assets to or purchase of assets from a foreigner)?
=+Would they be entered in the current account (as a payment
=+1. How would the following transactions be categorized in the U.S. balance of payments accounts?
=+ 3. Why did Subaru gain more than Toyota?
=+2. Why is a weaker yen good for the profits of Japanese auto companies?
=+Why would Abenomics lead to a weaker yen?
=+Explain this complaint, using our analysis of how monetary policy works under floating exchange rates.
=+—they were also making it hard for Canadian manufacturers to compete with the United States.
=+ 2.In the late 1980s Canadian economists argued that the high interest rate policies of the Bank of Canada weren’t just causing high unemployment
=+1. Look at the data in Figure 33-8. Where do you see devaluations and revaluations of the franc against the mark?
=+d. Imposing taxes on Chinese exports, such as shipments of clothing, that are causing a political backlash in the importing countries
=+c. Removing restrictions on Chinese who want to invest abroad
=+b. Placing restrictions on foreigners who want to invest in China
=+a. China no longer fixes its exchange rate and allows it to float freely.
=+ Express the exchange rate as U.S. dollars per yuan, Then show with a diagram how each of the following policy changes will eliminate the disequilibrium in the market.
=+1. Draw a diagram, similar to Figure 33-7, representing the foreign exchange situation of China when it kept the exchange rate fixed.
=+b. Purchasing power parity today and five years from now
=+a. The real exchange rate now and five years from now, if today’s price index in both countries is 100
=+Over the next five years, the cost of that market basket rises to $120 in the United States and to 1,200 pesos in Mexico, although the nominal exchange rate remains at 10 pesos per U.S. dollar.
=+2. A basket of goods and services that costs $100 in the United States costs 800 pesos in Mexico, and the current nominal exchange rate is 10 pesos per U.S. dollar.
=+c. Mexican imports from the United States of goods and services
=+b. Mexican exports to the United States of other goods and services
=+a. The nominal peso-U.S. dollar exchange rate
=+1. Mexico discovers huge reserves of oil and starts exporting oil to the United States. Describe how this would affect the following.
=+d. A Chinese investor who owns property in the United States buys a corporate jet, which he will keep in the United States so he can travel around America.
=+c. AChinese company buys a used airplane from American Airlines and ships it to China.
=+b. Chinese investors buy stock in Boeing from American residents.
=+a. Boeing, a U.S.-based company, sells a newly built airplane to China.
=+1. Which of the balance of payments accounts do the following events affect?
=+How should domestic macroeconomic ain be adjusted as a consequence of international economic considerations?
=+ Why do countries choose different sola rate regimes, such as fixed exchange rates and floating ?
=+ How do real exchange rates affect the current account?
=+ What roles do the foreign exchange market and the exchange rate play?
=+What determines international capital flows?
=+What are the balance of payments accounts?
=+ Indicate whether each school would support the Fed’s actions.
=+ These measures caused the monetary base to increase from approximately $850 billion to over $4 trillion. What would an economist from each of the following viewpoints—1===+classical, Keynesian,
=+10. In response to the Great Recession, the Federal Reserve took drastic and largely untested measures to stabilize both the financial system and the macroeconomy.
=+Would you expect wealthy countries to have more sophisticated financial systems?
=+Do wealthy countries or poor countries tend to “turn over” their money more times per year?
=+b. Rank the countries in descending order of per capita GDP and velocity of money.
=+Country Nominal GDP per capita (U.S. dollars)Egypt | $3,685 South Korea | 27,539 Thailand | 5,899 United States | 57,436 Kenya | 1,516India | 1,723 Data from: IME.
=+a. Calculate the velocity of money for each of the countries. The following table shows GDP per capita for each of these countries in 2016 in US. dollars.
=+Kenya Kenyan pounds 1,309 4,050 India Indian rupees 20,059 113,575, Data from: Central Bank of Egypt; Bank of Korea; Bank of Thailand; Federal Reserve Bank o f St. Louis; Central Bank of Kenya;
=+information in 2016 for six countries.M1 (billions in nationaNominal GDP (billions i Country National currency currency) nnational currency)Egypt Egyptian pounds 540 1,838 South Korea Korean won,
=+As would be expected, the velocity of money is different across countries depending upon the sophistication of their financial systems—velocity of money tends to be higher in countries with
=+9. Monetarists believed for a period of time that the velocity of money was stable within a country. However, with financial innovation, the velocity began shifting around erratically after 1980.
=+8. Using a graph like Figure 32-3, show how a monetarist can argue that a contractionary fiscal policy need not lead to a fall in real GDP given a fixed money supply. Explain.
=+g. Maintain a 3% to 4% inflation rate today, which is necessary to fight future recessions.
=+f. Pursue large, expansionary fiscal policies during a liquidity trap.
=+e. Decrease the budget deficit as a percent of GDP when facing a recessionary gap.
=+ . Always maintain a balanced budget.
=+c. Increase the money supply in order to alleviate a recessionary gap.
=+b. Decrease government spending in order to decrease inflationary pressure.
=+a. Since the long-run growth of GDP is 2%, the money supply should grow at 2%.
=+7. Which of the following policy recommendations are consistent with the classical, Keynesian, monetarist, and/or Great Moderation consensus, and, expansionary
=+Explain what policies each economist would recommend and why.
=+business cycle, Great Moderation consensus, expansionary austerity, and secular stagnationist views of the macroeconomy.
=+6. The economy of Albernia is facing a recessionary gap, and the leader of that nation calls together its best economists representing the classical, Keynesian, monetarist, real
=+Gov Gov Gov em em erm men men men tbud trec tspe getb eipts ndin alan (villi g (bil ce(b 3-mon ons lions illio thTr ofdo ofdo nsof easu War ar dolla graM2gro rybil Years) s) 1s) wth wth Irate 18 18
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