Assuming the exchange rate is the foreign currency price of dollars (x), use an appropriate diagram...

Assuming the exchange rate is the foreign currency price of dollars (x), use an appropriate diagram and describe the effect of a domestic increase in G (i.e., our government increases its spending) on the value of the foreign currency.

Expert Solution

Rahul Sunny answered 3 years ago

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate

If the supply of dollars in the market for foreign-currency exchange shifts left, then the exchange rate rises and the quantity of dollars exchanged falls. rises and the quantity of dollars exchanged does not change. rises and the quantity of dollars exchanged rises. falls and the quantity of dollars exchanged does not change. If a country has a trade deficit It has positive net exports and positive net capital outflow. It has positive net exports and negative net capital...

1. The foreign exchange rate for the purchase or sale of foreign currency at an agreed...

1. The foreign exchange rate for the purchase or sale of foreign currency at an agreed future date is called the ________ exchange rate. A. forecast B. spot C. interest D. forward E. estimated 2. Retained earnings have no cost to a company because there are no dividend or interest payments required for them. A. True B. False 3. A firm's total assets at the end of last year were $507,000 and its net income was $46,270. What was its...

For each of the following events draw a diagram of the foreign exchange market for dollars...

For each of the following events draw a diagram of the foreign exchange market for dollars in equilibrium, and show the effect on the demand curve and/or the supply curve of dollars as a result of each of the events. Does the dollar rise or fall in value? i) Interest rates in the United States rise. ii) Speculators become convinced that the future value of the Japanese yen will be higher relative to the dollar than it is today.

In an open economy, why is the supply curve for dollars in the foreign-currency exchange market...

In an open economy, why is the supply curve for dollars in the foreign-currency exchange market vertical? Answers: Net capital outflow is determined by real GDP, not the real exchange rate. Net capital outflow is extremely sensitive to small changes in the real exchange rate. Net capital outflow is determined by the real interest rate, not the real exchange rate. Net capital outflow equals net exports.

Where does the supply of dollars in the foreign-currency exchange market come from?

Where does the supply of dollars in the foreign-currency exchange market come from? a. from Canadian national saving b. from Canadian net capital outflow c. from domestic investment d. from foreign demand for Canadian goods

The exchange rate of a currency is the price paid in one country's currency for the...

The exchange rate of a currency is the price paid in one country's currency for the currency of another country. If a company in the United States sources parts from a company in Europe, dollars will need to be converted to euros to pay for the parts. This need to convert currency introduces uncertainty as to the actual cost of the parts, since the exchange rate at the time the price is quoted may be different from the rate when...

Given a currency pair, what happens to the exchange rate if the foreign exchange market is...

Given a currency pair, what happens to the exchange rate if the foreign exchange market is in disequilibrium? Does it matter if the exchange rate is above or below the equilibrium rate? Understand what market forces drive the exchange rate back to equilibrium in both cases, whether or not the cases are different.

Draw a Demand and Supply diagram of the foreign exchange market for dollars in equilibrium. Suppose...

Draw a Demand and Supply diagram of the foreign exchange market for dollars in equilibrium. Suppose the Federal Reserve reduces interest rates while interest rates in Europe do not change. Make use of a graph of the foreign exchange market to show how this will affect the value of the dollar.

The nominal exchange rate is the price of one currency in terms of another currency.

6. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow ...

Use the Market for Loanable Funds, Net Foreign Investment and the Market for Foreign Currency Exchange...

Use the Market for Loanable Funds, Net Foreign Investment and the Market for Foreign Currency Exchange diagrams combined, to examine the impact of a removal of import tariff on each market. In your answer make sure that you fully explain the impact in each market and that you comment on the impact on each of the following variables: 1)private saving 2)public saving 3)national saving 4)investment 5)net foreign investment 6)exchange rate 7)net exports

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