Chapter 33: Q. 33.2LO (page 732)
Explain the demand for and supply of foreign exchange.
The different amount of currency exchange which would be obtainable in the exchange market at various prices on exchange rates.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
On Wednesday, the exchange rate between the Japanese yen and the U.S. dollar was per yen. On Thursday, it was . Did the dollar appreciate or depreciate against the yen? By how much, expressed as a percentage change?
Determine if each of the following items results in a surplus or deficit in the current account of the balance of payments.
a. A Central European corporation offers products to a chain of hobby stores in the United States.
b. Japanese citizens pay a U.S. travel agency to arrange hotel accommodations, ground transportation, and tours of many U.S. cities, including New York, Chicago, and Orlando.
c. A Mexican corporation hires an accounting firm in the United States to audit its financial accounts.
d. Following a severe earthquake in Pakistan, churches and mosques in the United States contribute humanitarian aid to the country.
e. A Canadian corporation supplies raw materials to a US microprocessor maker.
Suppose that initially in Figure 33-8, the market for Bahrain's currency, the dinar, is in equilibrium at point E1. Now, however, an increase in the U.S. real interest rate has occurred even as real interest rates in Bahrain and elsewhere in the world either have declined or have remained unchanged. What must Bahrain's central bank do, and why, if it wishes to maintain a fixed exchange rate?
Explain how the following events would affect the market for the Mexican peso, assuming a floating exchange rate.
a. Improvements in Mexican production technology yield superior guitars, and many musicians around the world buy these guitars.
b. Perceptions of political instability surrounding regular elections in Mexico make international investors nervous about future business prospects in Mexico.
Suppose that during a recent year for the United States, merchandise imports were trillion, unilateral transfers were a net outflow oftrillion, service exports were trillion, service imports weretrillion, and merchandise exports weretrillion.
a. What was the merchandise trade deficit?
b. What was the balance on goods and services?
c. What was the current account balance?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
