In an economy with a flexible exchange rate, an expansion in the nominal stock of money leads to the largest increase in aggregate demand when
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- Which of the following is least likely to be a cause of the fluctuation of exchange rates? Currency speculation (High) inflation Interest rates the price of goldHow would a contractionary monetary policy affect the exchange rate, net exports, aggregate demand, and aggregate supply?In July 2018 Yi Gang, Governor of the People’s Bank of China, said fluctuations in the foreign exchange market were mainly due to factors like a stronger U.S. dollar and external uncertainties. How can fluctuations in the currency exchange rate affect a country’s economy
- Using data from The Economist's Big Mac Index for 2019, the following table shows the local currency price of a Big Mac in several countries as well as the actual exchange rate between each country and the United States. At the time of the data collection, a Big Mac would have cost you $5.74 in the United States and GBP 3.29 in the United Kingdom. The actual exchange rate between the British pound and the U.S. dollar was $1.25 per pound. The dollar price of a Big Mac purchased in the United Kingdom was, therefore, computed as follows: Dollar price of a Big Mac in the United KingdomDollar price of a Big Mac in the United Kingdom = = GBP 3.29×$1.25GBP 1.00GBP 3.29×$1.25GBP 1.00 = = $4.11$4.11 For the price you paid for a Big Mac in the United States, you could have purchased a Big Mac in the United Kingdom and had some change left over for fries! Complete the final column of the table by computing the dollar price of a Big Mac for the countries where this amount is…If the interest rate in the United States rises, A) investors increase their demand for dollars and the U.S. exchange rate appreciates B) investors increase their demand for dollars and the U.S. exchange rate depreciates C) investors decrease their demand for dollars and the U.S. exchange rate appreciates D) investors decrease their demand for dollars and the U.S. exchange rate depreciates> (Please note that D is already incorrect)Using data from The Economist's Big Mac index for 2011, the following table shows the local currency price of a Big Mac in several countries as well as the actual exchange rate between each country and the United States. At the time of the data collection, a Big Mac would have cost you $4.07 in the United States and GBP 2.39 in the United Kingdom. The actual exchange rate between the British pound and the U.S. dollar was $1.63 per pound. The dollar price of a Big Mac purchased in the United Kingdom was, therefore, computed as follows: NOTE: here are the options for drop down questions for when u get there The exchange rate that would have equalized the dollar price of a Big Mac in the United States and Brazil (that is, the PPP exchange rate for Big Macs) is __________ ($0.43 per real OR $1.96 per deal OR $2.33 per real OR $2.63 per real). This change would mean that the dollar had ________ (appreciated OR depreciated) against the real.
- Using data from The Economist's Big Mac Index for 2011, the following table shows the local currency price of a Big Mac in several countries as well as the actual exchange rate between each country and the United States. At the time of the data collection, a Big Mac would have cost you $4.07 in the United States and GBP 2.39 in the United Kingdom. The actual exchange rate between the British pound and the U.S. dollar was $1.63 per pound. The dollar price of a Big Mac purchased in the United Kingdom was, therefore, computed as follows: S1.63 Dollar price of a Big Mac in the United Kingdom= GBP 2.39 x GBP 1.0 = $3.90 For the price you paid for a Big Mac in the United States, you could have purchased a Big Mac in the United Kingdom and had some change left over for french fries! Complete the final column of the table by computing the dollar price of a Big Mac for the countries where this amount is not given. Note: Round your answers to the nearest cent. Big Mac Index: July 25, 2011 Local…Suppose the Bank of Canada contracts the money supply in an effort to reduce aggregate demand by a particular amount, say $10 billion. If Canada was a closed economy, would the amount by which the Bank of Canada would need to reduce the supply of money to accomplish this goal be greater or smaller than the amount it would need to reduce the supply of money if Canada was a small open economy with a flexible exchange rate?In April 2002, the price of a Big Mac in the UK was £1.99. Using data from The Economist's Big Mac Index for April 2002, the following table shows the local currency price of a Big Mac in several countries and the actual exchange rate. At the time, a Big Mac in the United States would have cost you 2.49 pounds. The actual exchange rate between the pound and the euro was £0.69 per British pound. The euro price of a Big Mac in the United States was, therefore, 2.49 British pounds x £0.69 per British pound = £1.71, which is less than you'd have paid in the UK. For the price you paid for a Big Mac in the UK, you could have purchased a Big Mac in the United States and had some change left over for french fries. Big Mac Index: April 2002 Country Local Price Actual Exchange Rate Argentina 2.49 pesos £0.23 per peso Brazil 3.6 reais £0.29 per real United States 2.49 pounds £0.69 per pound Euro zone 2.67 euros £0.62 per euro Poland 5.9 zloty £0.17 per zloty Switzerland 6.3 francs £0.42 per franc…
- Relative inflation rates affect interest rates, exchange rates, the overall economic health of a country, and the operations and profitability of multinational companies. Consider the following statement: Countries with lower inflation rates will have lower interest rates. Based on your understanding of the relationship between relative inflation rates and exchange rates, identify whether the preceding statement is valid or invalid. The statement is invalid, because the nominal interest rate is independent of the inflation rate. The statement is valid, because the nominal interest rate is the sum of the real interest rate plus inflation, so lower inflation rates would result in lower interest rates.According to the simple monetary model, money is growing at 5% in the United States and 6% in the United Kingdom, while real GDP is rising at 3% in the United States and at 5% in the United Kingdom. What will this do to the exchange rate?To prevent an appreciation of the British pound, the U.S. Federal Reserve has to: Sell U.S. currency Buy British currency Sell British currency Devalue the U.S. dollar