Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 21, Problem 4RQ
To determine
The exchange rate between dollar and pound.
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The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at Bank B for $90,000 using its
correspondent relationship with Bank B:
O a. Bank A's pound-denominated account at B will rise by £45,000.
O b. Bank B's dollar-denominated account at A will fall by $90,000.
O c. Bank B's pound-denominated account at A will rise by £45,000.
O d. Bank A's dollar-denominated account at B will rise by $90,000.
11. Suppose that the nominal exchange rate between the euro and the British pound
was €0.80 per £1.0 last year, one unit of German output cost €4.0 last year, and one unit of
British output cost £6.0 last year.
a. What was last year's real exchange rate between the U.K. and Germany, expressed as the
cost of British output (i.e. - the quantity of German output that exchanges for 1 unit of
British output)? In which country were goods more expensive last year?
b. Suppose that between last year and this year the British pound depreciated by 25% against
the euro (a 25% decrease in the number of euros required to buy 1 pound). If the price of
goods in the U.K and Germany are unchanged from last year, what is this year's new real
exchange rate? In which country are goods more expensive this year?
Now suppose, instead, that between last year and this year, the pound depreciated by 25%
against the euro and Germany experienced a 40% decrease in its price level (a 40%
decrease in the number of…
A family from the US is planning a vacation in Peru for the winter holidays. The
current exchange rate is $1 US buys 4.04 Peruvian soles. If the family figures
that they need exactly 15,392.4 soles in Peru for their vacation, how many US
dollars should they convert?
O $3,444
$3,810
$4,112
$4,440
Chapter 21 Solutions
Macroeconomics
Ch. 21.1 - Prob. 1QQCh. 21.1 - Prob. 2QQCh. 21.1 - Prob. 3QQCh. 21.1 - Prob. 4QQCh. 21.A - Prob. 1ADQCh. 21.A - Prob. 1ARQCh. 21.A - Prob. 1APCh. 21 - Prob. 1DQCh. 21 - Prob. 2DQCh. 21 - Prob. 3DQ
Ch. 21 - Prob. 4DQCh. 21 - Prob. 5DQCh. 21 - Prob. 6DQCh. 21 - Prob. 7DQCh. 21 - Prob. 8DQCh. 21 - Prob. 9DQCh. 21 - Prob. 10DQCh. 21 - Prob. 11DQCh. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQCh. 21 - Prob. 1PCh. 21 - Prob. 2PCh. 21 - Prob. 3PCh. 21 - Prob. 4PCh. 21 - Prob. 5P
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- If Boblandia had a flexible (floating) exchange rate, it would cost 5 Bobos to purchase a Canadian dollar. The Central Bank of Boblandia (aka, the Bank of Boblandia, or BoB) has fixed the exchange rate, saying it will buy or sell Bobos at C$0.22 for each Bobo. Which of the following is true (assuming no capital controls in Boblandia)? O At the fixed exchage rate, supply of Bobos exceeds demand. Expansionary monetary policy can restore the balance between supply and demand of Bobos. O At the fixed exchage rate, supply of Bobos exceeds demand. Contractionary monetary policy can restore the balance between supply and demand of Bobos. O At the fixed exchage rate, supply of Bobos is less than demand. Expansionary monetary policy can restore the balance between supply and demand of Bobos. O At the fixed exchage rate, supply of Bobos is less than demand. Contractionary monetary policy can restore the balance between supply and demand of Bobos.arrow_forward8. Why exchange rates matter Suppose that you go on vacation to Canada every summer. Last year, the hotel room where you stayed cost C$100 per night, and it costs the same this year. The exchange rate was 1.04 US$/C$ last year, and it is 0.95 US$/C$ this year. This means you will pay per night this year than you paid last year. The U.S. dollar-Canadian dollar exchange rate is essentially the price of a Canadian dollar in terms of U.S. dollars. When this price falls, the Canadian dollar is said to depreciate against the U.S. dollar. Thus, from your analysis, you can conclude that when the Canadian dollar depreciates against the U.S. dollar, Canadian goods and services become expensive for Americans. DeutschAuto is a German automaker that pays most of its production costs in euros. Suppose that in 2007, DeutschAuto's cost of producing a car was €23,000 and that the company sold a car in the United States for $36,000. Further, suppose that the dollar-euro exchange rate rose from 1.35$/ €…arrow_forwardIf Boblandia had a flexible (floating) exchange rate, it would cost 5 Bobos to purchase a Canadian dollar. The Central Bank of Boblandia (aka, the Bank of Boblandia, or BoB) has fixed the exchange rate, saying it will buy or sell Bobos at C$0.17 for each Bobo. Which of the following is true (assuming no capital controls in Boblandia)? O At the fixed exchage rate, supply of Bobos exceeds demand. The BoB's holdings of Canadian dollars will increase. O At the fixed exchage rate, supply of Bobos exceeds demand. The BoB's holdings of Canadian dollars will decrease. At the fixed exchage rate, supply of Bobos is less than demand. The BoB's holdings of Canadian dollars will increase. O At the fixed exchage rate, supply of Bobos is less than demand. The BoB's holdings of Canadian dollars will decrease.arrow_forward
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