Question
In: Economics
Q. Assume a basket that costs $100 in the U.S. would cost $120 in the United...
Q. Assume a basket that costs $100 in the U.S. would cost $120 in the United Kingdom. (18 pts)
a) What is the U.S. real exchange rate, qUS/UK, with the United Kingdom? Intuitively, what does this real exchange rate imply? (5 pts)
b) Does PPP hold true here? Why? (5 pts)
c) Instead, let’s assume that a basket that costs $100 in the U.S. would cost also $100 in the United Kingdom. For the next year, the Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep U.K. inflation at 3%. Does PPP hold true here? If so, use relative PPP to predict what will happen to the dollar’s value against the poundin one year’s time. (8 pts)
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Q. Assume a basket that costs $100 in the U.S. would cost $120 in the United...
Q. Assume a basket that costs $100 in the U.S. would cost $120
in the United Kingdom. (18 pts)
a) What is the U.S. real exchange rate, qUS/UK, with the United
Kingdom? Intuitively, what does this real exchange rate imply? (5
pts)
b) Does PPP hold true here? Why? (5 pts)
c) Instead, let’s assume that a basket that costs $100 in the
U.S. would cost also $100 in the United Kingdom. For the next year,
the Fed is predicted...
1. A basket of goods costs $8,500 in the U.S. Exact same goods basket costs €7,200...
1. A basket of goods costs $8,500 in the U.S. Exact same goods
basket costs €7,200 in Europe. The exchange rate is €.8144/$.
A. What is the over/undervaluation of the
€?
B. What is the over/undervaluation of the
$?
2. At the start of the year, the exchange rate was $1.35/€. At
the end of the year, the exchange rate is $1.43/€. If U.S.
inflation was 5% and European inflation was 3%, what has been the
nominal and real change...
The current dollar−pound exchange rate is $2 per British pound. A U.S. basket that costs $100...
The current dollar−pound exchange rate is $2 per British pound.
A U.S. basket that costs $100 would cost $140 in the United
Kingdom. For the next year, the U.S. Fed is predicted to keep U.S.
inflation at 2% and the Bank of England is predicted to keep U.K.
inflation at 3%. The speed of convergence to absolute PPP is 15%
per year.
1. (Scenario: Monetary Approach in the Long-run) What is the
current U.S. real exchange rate with the United...
Consider a basket of consumer goods that costs $60 in the United States. The same basket of goods costs NOK 40 in Norway.
7. Computing real exchange rates Consider a basket of consumer goods that costs $60 in the United States. The same basket of goods costs NOK 40 in Norway. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table.
A monopolist faces a demand curve of P = 120 – Q, and has costs of...
A monopolist faces a demand curve of P = 120 – Q, and has costs
of C = 50 + 20Q. The monopolist sets a uniform price to maximize
profits.
Group of answer choices
a) All of the answers are correct.
b)The profit-maximizing price is 70.
c)Deadweight loss is 1250.
d) Producer surplus is 2500.
Assume that the U.S. is a large country in the market for flip-flops. U.S Q Supply=...
Assume that the U.S. is a large country in the market for
flip-flops.
U.S
Q Supply= 10P
Q Demand= 105-5P
ROW
Q Supply= 20P
Q Demand= 90-10P
1. calculate the free trade price, based on supply and demand in
both the U.S. and the Rest of the World (ROW).
Suppose the U.S —as a large country—puts a $1 tariff on this
good. What will be:
a. the equilibrium price (PUS) in the U.S.?
b. the equilibrium price (PROW) in the...
Assume a Big Mac is $3 in the U.S. How much would the Big Mac cost...
Assume a Big Mac is $3 in the U.S. How much would the Big Mac
cost in China?
Conduct some research. Identify at least one difference between
the typical menu offering in the U.S. and the menu offering in
China. Be sure to provide a citation.
Conduct some research. Identify a major fast-food competitor
that McDonalds faces in China. Be sure to provide a
citation.
Conduct some research. Locate a video commercial for McDonalds
in China. Identify at least one...
Assume that two firms are in a Cournot oligopoly market. Market demand is P=120 - Q...
Assume that two firms are in a Cournot oligopoly market. Market
demand is P=120 - Q where Q isthe aggregate output in the market
and P is the price. Firm 1 has the cost function
TC(Q1)=30 + 10Q1 and Firm 2 has the cost
function TC(Q2)=15 + 20Q2.
a) Write down the
Profit function of Firm 1:
Profit function of Firm 2:
b) Using the profit functions in part (a), obtain the reaction
function of Firm 1 to Firm 2....
A monopolist has the following demand function and marginal cost function P = 120 – Q...
A monopolist has the following demand function and marginal cost
function P = 120 – Q and MC = 30 + Q.
i. Derive the monopolist’s marginal revenue function.
ii. Calculate the output the monopolist should produce to
maximize its profit.
ii. (continuation)
iii. What price does the monopolist charge to maximize its
profit?
Now assume that the monopolist above split into two large firms
(Firm A and Firm B) with the same marginal cost as the
monopolist.
Let qA...
Suppose a monopolist faces a market demand curve Q= 120 - 2p. a. If marginal cost...
Suppose a monopolist faces a market demand curve Q= 120 - 2p. a.
If marginal cost is constant and equal to zero, what is the
magnitude of the welfare loss? b. If marginal cost increases to MC=
10, does welfare loss increase or decrease? Use a graph to explain
your answer.
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