(Table: Exchange Rates and Prices) Suppose a computer costs $500 in the United States. If PPP were to hold at the given nominal exchange rate, then the price of a computer in Mexico would be Country Brazil (real) Mexico (peso) India (rupee) South Africa (rand) OOG 5,000 500 50 0.02 Exchange Rate per U.S. Dollar 2.2 10 45 8 pesos. Price of a Computer in Local Currency 1,200 6,000 18,000 3,500

(Table: Exchange Rates and Prices) Suppose a computer costs $500 in the United States. If PPP were to hold at the given nominal exchange rate, then the price of a computer in Mexico would be Country Brazil (real) Mexico (peso) India (rupee) South Africa (rand) OOG 5,000 500 50 0.02 Exchange Rate per U.S. Dollar 2.2 10 45 8 pesos. Price of a Computer in Local Currency 1,200 6,000 18,000 3,500

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter31: Open-Economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 8PA

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2. Determining long-term exchange rates Consider two countries, the United States and Japan, that trade with each other. Suppose that the productivity growth in the United States accelerates, but it remains the same in Japan. The following graph shows the supply and demand for the Japanese yen in the United States before the change in productivity. The vertical axis is the exchange rate of the yen in terms of the dollar, and the horizontal axis is the quantity of yen. Show how the change in productivity affects the equilibrium exchange rate by shifting one or both of the curves on the graph. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Supply Demand Supply Demand EXCHANGE RATE (Dollars per yer
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Figure 1: Foreign Exchange Market for US dollar ($). Exchange rate (e) is the price of one US$ in terms of Philippine peso (PHP) Ss e (Php) eo Ds Quantity of $
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9. Balance of payments The following tables show a hypothetical balance of payments statement for the United States. (Note: All values are in billions of dollars.) Complete the tables by filling in the missing cells. (Hint: Use the negative sign for all debits, and assume that the total balance of payments equals zero.) Balance of Payments CURRENT ACCOUNT Debits Credits Balance U.S. Merchandise Exports 500 .S. Merchandise -400 UImports Balance of Merchandise Trade U.S. Service Exports U.S. Service Imports -340 Balance on Service Trade 80 Balance on Goods and Services Income Receipts of Americans from Abroad 650 Income Receipts of Foreigners in the U.S. Net Income Receipts 35 Net Unilateral Transfers Balance on Current Account -615 Income Receipts of Foreigners in the U.S. Net Income Receipts 35 Net Unilateral Transfers Balance on Current Account -615 CAPITAL ACCOUNT Debits Credits Balance Foreign Investment in the U.S. 900 U.S. Investment Abroad -550 Balance on Capital Account OFFICIAL…
4) Suppose the price level in India is 9,500, the price level in the United States is 140, and the price level in Brazil is 750. Suppose the current nominal exchange rates are 75 Indian rupee per dollar and 5 Brazilian real per dollar. Calculate the real exchange rates (rounded to two decimal places) between each pair of countries. Note that you will have to first calculate the nominal exchange rate between Brazil and South India before calculating the real exchange rate between those two countries. (4
1.) How might you try to fix various balance of payments problems? (Be sure to discuss current account, capital account, currency policy,monetary and fiscal policy
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