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2. Assume that there are two countries: USA and Europe. The exchange rate is CIHTEtljF $1.Euro. The US currently.r has external assets whose dollar Tcalue
2. Assume that there are two countries: USA and Europe. The exchange rate is CIHTEtljF $1."Euro. The US currently.r has external assets whose dollar Tcalue is $5300 and external liabilities with a dollar value of 5113.033. Assume that 70 percent of US external assets in Europe are denominated in Euros [the remaining 30 percent are in dollars) and 30 percent of US external liabilities to Europe are denominated in dollars [the remaining 20 percent are in Euros). a. Assume that the dollar appreciates to $0.8-"Euro. Compute the new value of external assets and liabilities and the net foreign asset position (in dollars). b. Assume that the exchange rate remains $1.-"Euro_. but the value of all European assets goes up by 20 percent. while the value of US assets remains unchanged. Compute the new net foreign asset position. c. Assume that during the course of a year there are no valuation changes. but the US runs a current account decit of 52131313. Compute the net foreign asset position at the end of the year
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