Evaluate the following statement:"if lower exchange rates increase a nation's exports, the govermment should do everything in its power to anure that the exchange rate for its cumency is an low as it can possbly beThis statement does nat acknowledge that lower exchange ratesOA couid result in a reluctance from other countries to accept this nation's currency for payment of any goodn or servicesOB. could make a currency virtually worthless.O C. make a nation's imports more expensive.COD. None of the above responses are acknowledged by the statement.

The value of one country's currency in relation to another country's or economic zone's currency is…

Answered: ge that lower exchange rates rom other…

ge that lower exchange rates rom other countries to acoept this natior's currency for payment mly worthless re expensive.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

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If foreign investors buy more U.S. stocks and bonds, how would that show up in the current account balance?
Suppose the United States decides to subsidize theexport of U.S. agricultural products, but it does notincrease taxes or decrease any other governmentspending to offset this expenditure. Using a threepanel diagram, show what happens to nationalsaving, domestic investment, net capital outflow, theinterest rate, the exchange rate, and the trade balance.Also explain in words how this U.S. policy affects theamount of imports, exports, and net exports.
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Consider a country with a flexible exchange rate, and which initially has a current account surplus of zero. Then, suppose there IS an anticipated InCrease in tuture total tactor productivity. a) Determine the eauilibrium etects on the domestic economv in the case where there are no capita. controls. In particular, show that there will be a current account dehicit when arms and consumers anticipate the increase in future total factor productivity. b) Now, suppose that the government dislikes current account deficits, and that It imposes capital controls in an attempt to reduce the current account deficit. With the anticipated increase in future total factor productivity, what will be the equilibrium efects on the economy? Do the capital controls have the desired efect on the current account deficit? Do capital controls dampen the effects of the shock to the economy on output and the exchange rate? Are capital controls sound macroeconomic policy in this context? Why or why not?
What is the exports effect? The exports effect is the result that the lower the exchange rate, other things remaining the same, the O A. higher are the prices of Canadian-produced goods and services to foreigners and the greater is the volume of Canadian imports O B. lower are the prices of foreign-produced goods and services to Canadians and the greater is the volume of Canadian exports O C. higher are the prices of foreign-produced goods and services to Canadians and the greater is the volume of Canadian imports O D. lower are the prices of Canadian-produced goods and services to foreigners and the greater is the volume of Canadian exports Click to select your answer and then click Check Answer. All parts showing Clear All Check Answer P Type here to search 立

Determine which 'account of the Balance-of-Payments is affected the following transaction: A local parent sends 500 Euros to his/her son who is studying engineering at a German university. Select one: O a. Capital Account Foreign Direct Investment O b. Capital Account - Portfolio Investment Current Account - Transfers Od. Current Account - Imports O e. Current Account Exports
Which of the following statement is incorrect? O Most of the answers are correct. O Diversifying investments across several countries often reduces risk. The absolute purchasing power parity theory posits that exchange rates are determined by the differences in the prices of a given market basket of traded goods and services when there are no trade barriers. O An exchange rate of two currencies found by using a common third currency is known as an interest rate. O Exchange rates can be expressed as the number of units of the domestic currency per one unit of the foreign currency.
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A case study in the chapter analyzed purchasingpower parity for several countries using the pricc ofBig Macs. Here arc data for a few more countries: a. For each country, compute the predicted exchangerate of the local currency per U.S. dollar. (Recallthat the U.S. price o( a Big Mac was $4.93.)b. According to purchasing-power parity, what is thepredicted exchange rate between the Hungarianforint and the Canadian dollar? What is the actualexchange rate?c. How well docs the theory of purchasing-powerparity explain exchange rates?
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The purchasing power parity may not fully explain exchange rate movements because Select one: the foreign price level changes by more than the domestic price level O a. O b. of changes in the price of goods and services not traded internationally O c. different countries have different inflation rates O d. monetary policy differs across countries O e. the domestic price level changes by more than the foreign price level Next pa Epage e to search
Suppose that Americans decide to increase theirsaving.a. If the elasticity of U.S. net capital outflow withrespect to the real interest rate is very high, willthis increase in private saving have a large orsmall effect on U.S. domestic investment?b. If the elasticity of U.S. exports with respect to thereal exchange rate is very low, will this increase inprivate saving have a large or small effect on theU.S. real exchange rate?