What effect does a depreciation of the domestic currency have on a country's export prices and competitiveness in the global market? A. It increases export prices and reduces competitiveness. B. It decreases export prices and increases. competitiveness. C. It has no effect on export prices and competitiveness. D. It increases both export prices and competitiveness.
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- 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.The cha pter notes that the rise in the U.S. tradede ficit during the I 980s was due largely to therise in the U.S. budget deficit. On the other hand,the popular press sometimes claims that theincreased trade deficit resulted from a decline inthe quality of U.S. produc ts relative to foreignproducts.a. Assume that U.S. products d id decline in rela tivequality during the 1980s. How did this affect netexports at any given exchange mte?b. Draw a three-panel diagram to show the effect ofthis shift in net exports on the U.S. real exchangerate and trade balance.c. Is the claim in the popular press consist,:,nt withthe model in this chapter? Docs a decline in thequality of U.S. products ha vc any effect on ourstandard of living? (Hin I: Wh,:,n we sell our goodsto foreigners, what do we receive in rcrurn?)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?
- QUESTION 9 China has been devaluing their currency. This makes sense economically because OA. It lowers the price of its exports B. It increases the price of its exports O C. There is no economic benefitD 0 Question 15 91000 AERIN Iris Meado Question 16 BRACELETSIALE... Cigarettes and nicotine patches have a positive but small cross-price elasticity. Ceteris paribus, a cigarette tax on consumers would imply that: Ceteris paribus, the Australian dollar nominal exchange rate: O There will be a large movement up the demand and supply curve of cigarettes and demand for nicotine patches would rise by a large amount O Demand for cigarettes would fall and demand for nicotine patches would fall by a small amount O The demand for cigarettes would fall and demand for nicotine patches would rise by a small amount O There will be a small movement up the demand and supply curve of cigarettes and demand for nicotine ches would fall by a large amount UTS O will rise if Australian interest rates fall O will fall if Australian inflation falls relative to inflation in our trading partners will fall if Australian interest rates rise will rise if Australia's trading partners income rises The Eleventh…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?
- 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. Current Account Transfers O c. Capital Account Portfolio Investment O d. Current Account Imports O e. Current Account - Exports re to searchAssume that American rice sells for $100 per bushel,Japanese rice sells for 16,000 yen per bushel, and thenominal exchange rate is 80 yen per dollar.a. Explain how you could make a profit from thissituation. What would be your profit per bushelof rice? If other people were to exploit the sameopportunity, what would happen to the price of ricein Japan and the price of rice in the United States?b. Suppose that rice is the only commodity in theworld. What would happen to the real exchangerate between the United States and Japan?Over time, a real depreciation in the value of a nation's currency should result in Select one: a. exports rising and imports falling. O b. exports falling and imports rising. O. both imports and exports rising. O d. both imports and exports falling.
- Why would it not be advisable for an exporter to simply require transactions with an importer be in the currency of the exporter's country? What is a better option and why? Please answer correct explain plz asapA senator renounces his past support for protectionism: "The U.S. trade deficit must be reduced, but import quotas only annoy our trading partners. If we subsidae US. exports instead, we can reduce the deficit by increasing our competitiveness. Shew the effect of an export subsidy on the market for foreign exchange Demand Bupply benand Quantiy of Dotars Quantity of Dollars True or False: The U.S. real exchange rate depreciates as a result of this export subsidy. O True O False The export subsidy leads to in the trade deficit.tf countries A and B are the only two countries in the world, then if the currency of country A appreciates, the currency of country B Can appreciale relative to other countries Ob May appreciate or depreciate, depending on the volume of trade betweon the two countries OC Must appreciate Od Must depreciate Ce May appreciate or depreciate, depending on the elasticity of demand for the exports of country A