Question
In: Economics
A country has a lower inflation rate than all other countries. It has more rapid economic...
- A country has a lower inflation rate than all other countries. It has more rapid economic growth. The central bank does not intervene in the foreign exchange market. What can you say (and why) about:
- The exchange rate?
- The current account balance?
- The expected exchange rate?
- The interest rate differential?
- Interest rate parity?
- Purchasing power parity?
Solutions
Expert Solution
A country has a lower inflation rate than all other countries. It has more rapid economic growth. The central bank does not intervene in the foreign exchange market. What can you say (and why) about:
Theory: When a country has less inflation rate then it means that it can produce more competitively within the country and it will have more competitive products in world market due to low costs of production. It will create more markets for its exports and as exports increase, the demand for home currency will increase and this leads to appreciation of home currency. More exports will also lead to balance of trade being more on a positive side. As the demand for money goes up in home country the interest rates are likely to go up.
The exchange rate?- As discussed earlier- It appreciates.
The current account balance? it improves as more exports are being made possible.
The expected exchange rate? The domestic currency rate will go up as people expect to go up further.
The interest rate differential(IRD)? It measure the difference in interest rates between two securities.: Hence the IRD would go up.
Interest rate parity? Home currency will be exchanges for more expensive future prices than the current spot prices.
Purchasing power parity? As home currency is getting expensive purchasing power parity will go down as
Rahul Sunny answered 1 year agoRelated Solutions
Over the long run, a country with a higher inflation rate than other countries will see...
Over the long run, a country with a higher inflation rate than
other countries will see its currency
A
appreciate.
B
depreciate.
C
maintain its value.
Does having low labor standards (relative to other countries) enable a country to export more than...
Does having low labor standards (relative to other countries)
enable a country to export more than it might otherwise? Explain
your reasoning.
An economist wonders if corporate productivity in some countries is more volatile than in other countries....
An economist wonders if corporate productivity in some countries
is more volatile than in other countries. One measure of a
company's productivity is annual percentage yield based on total
company assets. A random sample of leading companies in France gave
the following percentage yields based on assets.
4.5 5.9 3.5 3.3 2.2 3.5 2.8 4.4 5.7 3.4 4.1
6.8 2.9 3.2 7.2 6.5 5.0 3.3 2.8 2.5 4.5
Use a calculator to verify that the sample variance is s2 ≈...
An economist wonders if corporate productivity in some countries is more volatile than in other countries....
An economist wonders if corporate productivity in some countries
is more volatile than in other countries. One measure of a
company's productivity is annual percentage yield based on total
company assets.
A random sample of leading companies in France gave the following
percentage yields based on assets.
4.9
5.5
3.7
3.8
2.2
3.5
2.8
4.4
5.7
3.4
4.1
6.8
2.9
3.2
7.2
6.5
5.0
3.3
2.8
2.5
4.5
Use a calculator to verify that the sample variance is
s2 ≈...
An economist wonders if corporate productivity in some countries is more volatile than in other countries....
An economist wonders if corporate productivity in some countries
is more volatile than in other countries. One measure of a
company's productivity is annual percentage yield based on total
company assets.
A random sample of leading companies in France gave the following
percentage yields based on assets.
4.9
5.3
3.6
3.9
2.6
3.5
2.8
4.4
5.7
3.4
4.1
6.8
2.9
3.2
7.2
6.5
5.0
3.3
2.8
2.5
4.5
Use a calculator to verify that the sample variance is
s2 ≈...
An economist wonders if corporate productivity in some countries is more volatile than in other countries....
An economist wonders if corporate productivity in some countries
is more volatile than in other countries. One measure of a
company's productivity is annual percentage yield based on total
company assets.
A random sample of leading companies in France gave the following
percentage yields based on assets.
4.9
5.3
3.6
3.9
2.6
3.5
2.8
4.4
5.7
3.4
4.1
6.8
2.9
3.2
7.2
6.5
5.0
3.3
2.8
2.5
4.5
Use a calculator to verify that the sample variance is
s2 ≈...
Historically, the failure rate for franchises has been lower than that of other business ventures. True...
Historically, the failure rate for franchises has been lower
than that of other business ventures.
True or False
What are the economic benefits and costs of other countries implementing lower corporate tax rates, like...
What are the economic benefits and costs of other countries
implementing lower corporate tax rates, like Trump has recently
done in the US? Show equations and economic theory to support your
answer.
Country A can produce every good more efficiently (i.e., at lower cost) than country B. Therefore,...
Country A can produce every good more efficiently (i.e., at
lower cost) than country B. Therefore,
A. Country A should not trade with country B for any goods.
B. Country B should lower its production costs so that it has
some goods that it can trade to country A.
C. Country A should trade with country B, but only for those
goods for which country B has an absolute advantage.
D. Country A should trade with country B, but only...
a- Select a country of your choice ( other than US, SAUDI ARABIA , EUROPEAN COUNTRIES,...
a- Select a country of your choice ( other than US, SAUDI ARABIA
, EUROPEAN COUNTRIES, UK,GCC countries)
b- Describe the nature of Ex-Change rate arrangements adopted
(FIXED/FLEXIBLE/MANAGED FLOAT OR ANY OTHER)
c-Track the history of the country’s currency with USD for the
past 1 YEAR and note the 52-week average. Examine (appreciation or
depreciation) the performance of the currency against USD .
d- Examine reasons behind the currency's performance and its
impact of the currency's performance on the overall...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- 5. Anyone who has ever owned a car will recognize the following situations. Suggest what might...
- in order for IT to be successful in business, the organization must plan how to use...
- What are the major types of customer or patient service-level issues that exist in health care?
- 1. Does it deviate from culture norms for what is acceptable? 2. Is it maladaptive? 3....
- Environment The environment is one of the most influential sectors in recent ycars . So, the...
- The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The...
- Demographers have noted that the world’s population distribution will undergo a major shift in the next...
ADVERTISEMENT