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 5P
To determine
The requirement of US reserve of loonies.
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In 1961, Charles de Gaulle decided he did not want the French franc to be considered as a second-rate currency, so he chopped two zeros off the value of the franc, which meant the exchange rate was approximately FF5/$ instead of FF500/$ (he also ordered that the $ key on IBM punchcard machines be replaced by the FF symbol). This had no immediate impact on any domestic or international transactions, but was supposed to convince the French people to put inflation behind them and keep their currency in line with the Dmark and the British pound. Whether or not this change in currency values made any difference, the relative inflation rate did slow down and the value of the FF did rise relative to the dollar over the next two decades. At the same time, the current account balance improved slightly. Based on these factors, explain what happened to the growth rate, show how the NX and NFI curves must have shifted, and describe the underlying economic developments.
Coffee grown in Guatemala is priced at 17 Guatemalan quetzal per pound (Guatemalan quetzal, or GTQ, is the currency
of Guatemala). Comparable coffee grown in the U.S. is priced at $8.40 per pound. One Guatemalan quetzal trades for $0.13 in the
foreign exchange market.
Find the real exchange rate from the perspective of the United States and from the perspective of Guatemala, and determine
which country's coffee is more competitively priced?
Instructions: Enter your responses rounded to two decimal places.
Real exchange rate from the perspective of the U.S. is
Real exchange rate from the perspective of Guatemala is
Coffee is more competitively priced in [Guatemala
V
143) What three real-world complications keep purchasing power parity from being a complete explanation of exchange rate fluctuations in the long run? Explain.
144) Will the use of the euro help increase economic growth in countries in the European Union? Will it help individual countries using the euro in times of recession? Explain.
145) South Korea, Indonesia, Malaysia, and Thailand all pegged their currencies to the dollar at one point in time. Because some of these currencies were overvalued at the pegged rate, speculators anticipated these countries would abandon the peg and speculators began selling those currencies. Explain how this speculation would affect the ability of a country to maintain a pegged exchange rate.
146) In 1991, Argentina decided to peg its currency (the Argentinean peso) to the U.S. dollar. Most of Argentina's trading, however, was with Brazil and Europe, not the United States. What result would pegging the Argentinean peso to the U.S.…
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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