PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 4, Problem 3P
To determine
Calculation of the ratio of surplus or deficit to Country U’s exports.
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Consider the United States and the countries it trades with the most (measured in trade volume): Canada, Mexico, China, and Japan. For simplicity, assume these are the only four countries with which the United States trades. Trade shares (trade weights) and U.S. nominal exchange rates for these four countries are as follows:
Country (currency)
Share of Trade
$ per FX in 2015
$ per FX in 2016
Canada (dollar)
36%
0.8271
0.6892
Mexico (peso)
28%
0.0683
0.0538
China (yuan)
20%
0.1608
0.1522
Japan (yen)
16%
0.0080
0.0086
Compute the percentage change from 2015 to 2016 in the four U.S. bilateral exchange rates (defined as U.S. dollars per unit of foreign exchange, or FX) in the table provided.
Use the trade shares as weights to compute the percentage change in the nominal effective exchange rate for the United States between 2015 and 2016 (in U.S. dollars per foreign currency basket).
Based on your answer to (b), what happened to the value of the U.S. dollar against this…
PLEASE ANSWER ALL THE QUESTIONS
16. (CLO 6) Explain how changes in exchange rates impact the economy through the aggregate demand- aggregate supply (AD/AS) model. Explain how fluctuations in exchange rates can influence loans and banks. (16.3)
17. Contrast floating exchange rates, a soft peg, hard peg, and merged currency as options that a country’s economy has in terms of managing it’s exchange rate relative to the rest of the world. For each, give a benefit as well as a drawback. (16.4)
The table below shows data on U.S. exports and imports of goods and services for five years. For each of these years, indicate whether the United States was running a trade surplus or deficit, and dollar amount of the surplus or deficit, and calculate the ratio as a percent of the surplus
deficit to U.S. exports.
Instructions: In the event a deficit, do NOT include a negative sign (-) for either the dollar amount or the ratio (.% of exports). Enter your responses rounded to one decimal place.
U.S. Exports
(billions of dollars)
U.S. Imports
(billions of dollars)
Year
Surplus or
deficit
Amount of surplus/deficit
(billions of dollars)
Surplus/ deficit as a
percent of exports
1
457.1
642.0
Deficit
2
531.2
667.2
Deficit
%
3
592.7
696.6
Deficit
4
745.0
721.5
Surplus
%
687.6
720.4
Deficit
%
Chapter 4 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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