Suppose the price level in the euro zone rises by 12%, while the price level in Denmark remains the same. That is, the inflation rate in the euro zone is higher than in Denmark. Drag the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. Supply of Kroner Demand for Kroner Supply of Kroner Demang for Kroner QUANTITY OF KRONER Suppose the real interest rates in the euro zone and Denmark are initially the same. Then the real interest rate in Denmark falls, while the real interest rate in the euro zone remains the same. This will cause the supply of kroner to v and the demand for kroner to which causes the euro to v relative to the Danish krone. EUROS PRICE OF KRONER
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- RUBLES PER KRONE RUBLES PER KRONE 3. Changes in the foreign exchange market The following questions focus on the exchange rate between the Russian ruble and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of rubles you must pay for one krone. Suppose a recession in Russia causes Russian incomes to decrease, while incomes in Denmark remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drap one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply of Kraner Demand for Kraner Demand for Kroner QUANTITY OF KRONER Supply of Kroner ? The decrease in Russian Incomes causes the Danish krone to relative to the Danish krone. relative to the Russian ruble and causes the Russian…When Great Britain voted to leave the eurozone, the pound depreciated 17% against the dollar. It also raised fears that the eurozone, which uses the euro as a common currency, would fall apart. Suppose that the dollar is considered safer than the euro, given these conditions. The following graph shows the market for dollars, with the quantity of dollars measured along the horizontal axis and the price of dollars in terms of euros measured along the vertical axis (in other words, the euro/dollar exchange rate).PRICE (Rubles per won) 6. Changes in the foreign-exchange market The following questions focus on the exchange rate between the Russian ruble and the South Korean won. Assume the exchange rate is flexible. The exchange rate is defined as the number of rubles you must pay for one won. Suppose a recession in Russia causes Russian incomes to decrease, while incomes in South Korea remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for South Korean won if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. QUANTITY OF WON Supply of Won Demand for Won Demand for Won Supply of Won ? The decrease in Russian incomes causes the South Korean won to relative to the South Korean won. relative to the Russian ruble and causes the Russian ruble to…
- Suppose that a US-based company is buying Chinese goods. Current exchange rate for Chinese Yuan is 0.15 USD. The price of goods is ¥13,000 per unit. The company is buying 800 units per year with a fixed contract for the next two years. Suppose that Chinese Yuan appreciate to 0.2 USD in the next year. The US importer will respond to this by lowering the demand to 600 units in the third year. Plot the J- curve (write the amounts for month 1, 2 and 3)The graph represents a foreign exchange market and shows the supply and demand for Median Earth's currency, the shilling. The price of a shilling is stated in terms of Normandy's currency, the doubloon. The horizontal axis shows the quantity of shillings that are desired and offered for exchange. The exchange rate in doubloons per shilling is measured on the vertical axis. Answer the questions based on the graph.There is trade between the U.S. (domestic country) and Great Britain (foreign country) and the quantity of pounds supplied is positively related to the exchange rate. The exchange rate is defined as the domestic currency price of the foreign currency, i.e., dollars per pound. Using clearly labeled graphs of demand for and supply of the foreign currency, show and explain what will happen to: (i) the demand for pounds and/or; (ii) the supply of pounds; and (iii) the value of the dollar against the pound as a result of each one of the following changes. (a) a decrease in tariffs in the Great Britain. (b) a decrease in prices of goods produced in China. Both the U.S. and Great Britain trade with China. (c) a decrease in interest rates in the U.SEconomics Malaysia and the United States trade with each other. The currency in Malaysia is the "ringgit". Currently the exchange rate is approximately 3 ringgit per US dollar. Suppose that the GDP deflator in Malaysia rises relative to the GDP deflator in the United States. Which of the following shifts would we see in the Malaysian forex market? The demand for US dollars would fall. The supply of US dollars would fall. The demand for Malaysian ringgit would rise. The supply of Malaysian ringgit would fall."Roman Abramovitch" lecture: you must answer all questions. Displayed above is the (spot) foreign exchange market for the pound sterling and the GIG, the national currency of the country High Tech. At the initial equilibrium point X, 1 Pound 5 Gigs. Please answer the following questions: GIGS S₂ = 1 X O Z Se= DGIGS SE = DGIGS DE = SGIGS DE = SGIGS Billions of Pounds 1. Why does the supply curve for pounds slope upward? 2. Starting from an initial equilibrium of point X, consider a new, 5 billion pounds of capital inflow to High Tech. Under what situation would the new equilibrium be at point Y versus point Z? 3. Compare the (numerical) size of the monetary base or high-powered Money (Mo) at points X and Z. 4. If we knew that the money multiplier equals 2 and that the central bank of Freedonia had fully sterilized the capital inflow, could we estimate by how much real GDP would increase? 5. If the central bank decided instead not to sterilize, would the nominal or real gig exchange rate…The Big Mac index was introduced by The Economist magazine in 1986, as a playful example to introduce the concept of purchase power parity (PPP) and under/overvaluation of currencies. The PPP rates are usually compiled based on consumer baskets of comparable quality. The problem is that goods in different economies are hardly comparable. The customer basket contains only one good which is made everywhere in exactly the same way – McDonald’s Big Mac. You might think that is an oversimplification, but in fact the Big Mac Index has been widely used for comparing currencies ever since it was first published. Explore the concept behind the Big Mac index and critically assess the importance of comparability of goods in various economies.Consider the exchange rate between Jamaica and Tunisia. Typically, exchange rates vary over time, sometimes quite dramatically. The scenarios present various changes that may affect the exchange rate. Indicate whether each scenario will tend to cause an appreciation or depreciation of, or have no effect on, the value of Jamaican dollars relative to Tunisian dinars. The magazine The Economist publishes an article indicating that analysts expect the value of Tunisian dinars to rise relative to Jamaican dollars. The central bank in Jamaica announces that it will raise interest rates on government bonds. Based on a World Bank report, the inflation rate in Jamaica will be 1% next year, whereas the inflation rate in Tunisia will be 10.5%. The price of a specific basket of goods in Jamaica is roughly 2.0 times higher than the price of an identical basket of goods in Tunisia, even after adjusting for the exchange rate. Answer Bank appreciate no effect depreciateSEE MORE QUESTIONS