Question
ECON 3580 Long Answered Questions *PLEASE REFER TO THIS TEXTBOOK: Steven Husted and Michael Melvin, International Economics, Ninth Edition, Pearson* *Kindly need assistance with these
ECON 3580
Long Answered Questions
*PLEASE REFER TO THIS TEXTBOOK: Steven Husted and Michael Melvin, International Economics, Ninth Edition, Pearson*
*Kindly need assistance with these questions. Please give long, detailed, and explained answers so I can learn in the process. Thank you. Much appreciated*
1) State whether the following statement is TRUE, FALSE OR
UNCERTAIN. Justify your answer.
Based on (economic fundamentals) purchasing power parity the Canadian dollar is
undervalued
2) State whether the following statement is TRUE, FALSE OR UNCERTAIN. Justify your
answer.
(a) (5 marks) Suppose the Canadian CPI is 150, the U.S. CPI is 110 and the current exchange is
$1.46 CAD per U.S. dollar. Given this information, what is your advice to a currency
trader and why?
(b) (5 marks) If the current U.S. interest rate is 10 percent and PPP is expected to hold,
what should be the Canadian interest rate to maintain interest parity?
Q3. (6 marks) State whether the following statement is TRUE, FALSE OR
UNCERTAIN. Justify your answer.
Based on (economic fundamentals) purchasing power parity the Canadian dollar is
undervalued.
Q4. (6 marks) Why is it important for China to be on fixed than flexible exchange rates.
Briefly explain.
Q5. (6 marks) State whether the following statement is TRUE, FALSE OR
UNCERTAIN. Justify your answer.
Suppose we have two large open economies in the world, Home and Foreign. If the
home country has a lower closed economy (autarky) real interest rate than the foreign
country, then the home country is a net borrower at a world real interest rate below its
autarky interest rate and there is no world equilibrium real interest rate.
Q6. (5 marks) (a) Which theory explains better the U.S. current account deficits? Explain
taking into consideration the three theories of the current account.
(b) (5 marks) What major changes are needed to slash (reduce) U.S. trade deficits?
Briefly explain.
Q7. (6 marks) State whether the following statement is TRUE, FALSE OR
UNCERTAIN. Justify your answer.
Canada should peg (fix) its currency to the U.S. dollar once it has much the same
inflation rate as the United States.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started