1. If the aggregate supply and demand curves at the right describe the situation in an economy at some point in time, we would expect to see.............

2. When a country devalues its currency, we expect that

3. With a floating exchange rate, a monetary contraction causes

4. Suppose that a country has a mixture of individuals and companies that are in each of the following situations: Group I. These have borrowed in domestic currency to finance assets whose values are also in domestic currency. Group II. These have borrowed in foreign currency to finance assets valued in domestic currency. Group III. These have borrowed in domestic currency to finance assets valued in foreign currency. Group IV. These have borrowed in foreign currency to finance assets valued in (the same) foreign currency. Which of these groups see the domestic-currency value of their wealth fall when the country devalues? (Assume in each case that the initial value of the assets is at least as great as what was borrowed.)

5. If the U.S. economy moves into recession due to a decline in consumer confidence, which of the following do we not expect?

6. According to the estimates of "pass-through" in the assigned reading by Mann and Plck, if a foreign currency appreciated against the US dollar by 25%, by how much would you expect

7. Which country does the Economist article "More Spend, Less Thrift" criticize, and why?

8. Show the effects of the change on supply and demand for foreign exchange (dollars), and explain the reasons for these changes.

9. Had the Japanese exchange rate relative to the dollar been floating, how would this contraction of the Japanese economy altered the value of its currency?

10. Suppose that a company in India initially owns a factory worth 45 million rupees, that it has borrowed 1 million US dollars to finance its construction, and that these are its only assets and liabilities. a. If the exchange rate is initially 40 rupees per dollar, what is the initial value of the company, in rupees? If the rupee now depreciates by 20% what does the value of the company in rupees become? Would the effect of the depreciation on the value of the company be any different if it was measured in dollars?