Suppose that in a country the total holdings of banks were as follows:

required reserves = $45 million

excess reserves = $15 million

deposits = $750 million

loans = $600 million

Treasury bonds = $90 million

Show that the balance sheet balances if these are the only assets and liabilities.

Assuming that people hold no currency, what happens to each of these values if the central bank changes the reserve requirement ratio to 2%, banks still want to hold the same percentage of excess reserves, and banks don't change their holdings of Treasury bonds? How much does the money supply change by?

*While vacationing in Agra, India, the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees. If the exchange rate was previously 55 rupees per dollar, what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

*A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil?

Show your work.

*According to purchasing-power parity, what is the relationship between changes in price levels between two countries and changes in nominal exchange rates?

*If a country's exports were 500 billion pesos and its imports were 300 billion pesos, what would its trade balance be?

*A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers.

As a result of this exchange, by how much and in which direction did:

A. U.S. net exports change?

B. U.S. net capital outflow change?