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(a) Draw the foreign exchange market showing the yenrprice for Indian rupees. Label the equilibrium exchange rate lei), the equilibrium quantity (Eli), and the current
(a) Draw the foreign exchange market showing the yenrprice for Indian rupees. Label the equilibrium exchange rate lei), the equilibrium quantity (Eli), and the current exchange rate (ec). Assume that there is a surplus of the rupee at the current rate. (5 points) (b) Assume the current exchange rate for the British pound in terms of the Canadian dollar is $0.50 per pound. Based on this information, draw the foreign exchange market for Canadian dollars. Assume the market is in equilibrium. [5 points) (c) Using siderbyrside graphs of the exchange market for the yen W) and the Australian dollar [AS], show the impact of a decrease in the demand for yen. (5 points) (d) Based on the change indicated in part (c), is the Australian dollar appreciating or depreciating? (5 points) (e) If Japan began with a current account balance of zero, will the change in part (c) result in a current account surplus, deficit, or no change? Explain. [5 points] The United Kingdom and Australia are trade partners, each with a current account balance of zero. Australia's national income increases relative to the United Kingdom. (f) On a fully labeled foreign exchange market graph, illustrate the impact of the relative change in national income on the British pound sterling (GBP) with the price in terms of Australian dollars (AUD). [5 points} (2) Based on your response to part [e], has the Australian dollar appreciated or depreciated? {5 points) (h) Assume the new exchange rate is 2 AUD per 1 GBP. Calculate the price of the Australian dollar in terms of British pounds sterling. {5 points) Respond succinctly and precisely to each of the following scenarios. Hint: these are beginning with a currency value change; start from there, and do not consider what caused the change. (i) The countries leta and Epsilon are trade partners. The currency of Epsilon depreciates relative to the currency of Zeta. Ceteris paribus, how will this change affect: (i) Epsilon's net exports? Explain. {5 points] (ii) the capital and financial account of Epsilon? (5 points)
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