Use a simple formula for predicting appreciation or depreciation of the nominal exchange rate. List TWO...

Use a simple formula for predicting appreciation or depreciation of the nominal exchange rate. List TWO most relevant economic factors that the professional forecasters should consider for determining if the New Zealand dollar is likely to appreciate against the US dollar in the immediate future. State and explain your forecast for the NZD against the USD based on your assumptions about the current economic conditions.

Expert Solution

Rahul Sunny answered 8 months ago

1. What factors cause real exchange rate to rise? What does real exchange rate appreciation (depreciation)...

1. What factors cause real exchange rate to rise? What does real exchange rate appreciation (depreciation) imply for net exports? Why? (With appreciation, NX falls. With depreciation, NX rises) 2. What is purchasing power parity (PPP)? The law of one price? What should be real exchange rate if PPP holds? What should determine nominal exchange rate if PPP holds? Does PPP hold in practice? (No) Why? (not all goods are easily traded; even tradable domestic and foreign goods might not...

The nominal exchange rate is the nominal interest rate in one country divided by the nominal interest...

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Question 1 a) Discuss the exchange rates (real and nominal). b) Discuss what is an appreciation...

Question 1 a) Discuss the exchange rates (real and nominal). b) Discuss what is an appreciation and what is a depreciation. c) Discuss how an appreciation of Euro can affect Irish current account surplus. What will happen to the NCO then? d) Can you explain what you are expecting to happen we have a depreciation of Euro? e) Connect you answers in (d) above with the IS-LM model. Show it in a graph. f) Briefly discuss what does the PPP...

Distinguish precisely between the real exchange rate and the nominal exchange rate. &nb

Distinguish precisely between the real exchange rate and the nominal exchange rate. [8 marks]

Use the simple exchange-rate model (supply and demand model for foreign exchange market) to answer the...

Use the simple exchange-rate model (supply and demand model for foreign exchange market) to answer the following questions. 2.1. Assume an initial equilibrium level for price and quantity in the US versus China exchange rate market. Plot the exchange rate of US dollars per Chinese yuan versus the quantity of Chinese yuans traded. Then graphically simulate the impact of an increase in tariffs imposed by the US on Chinese goods and indicate your forecast for the potential changes in the...

Use a J-curve to illustrate the effect on the current account of an exchange rate depreciation....

Use a J-curve to illustrate the effect on the current account of an exchange rate depreciation. Explain why the curve has the shape that it does. What condition must be fulfilled to have a positive effect of the depreciation of the currency on the current account?

What happens to the real exchange rate if the nominal exchange rate can’t adjust ? (because...

What happens to the real exchange rate if the nominal exchange rate can’t adjust ? (because Denmark and EU have agreed to a fixed exchange rate system.

“Speculation” in Foreign Exchange Market question. context : expectation of currency appreciation/depreciation to make profit. Describe...

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Explain the “Revaluation” and “Devaluation” of the exchange rate. How do they differ from the “Appreciation”...

Explain the “Revaluation” and “Devaluation” of the exchange rate. How do they differ from the “Appreciation” and “Depreciation” of the exchange rate?

Distinguish between the nominal exchange rate and the real exchange rate . Explain the various short-run...

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