Chapter 18: Q1CU (page 638)
Question: Look at the data in Figure 18-8. Where do you see devaluations and revaluations of the franc against the mark?
Yes, devaluations and revaluations were seen between 1971 to 1995.
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Question: In the late 1980s Canadian economists argued that the high interest rate policies of the Bank of Canada weren't just causing high unemployment—they were also making it hard for Canadian manufacturers to compete with the United States. Explain this complaint, using our analysis of how monetary policy works under floating exchange rates.
A basket of goods and services costs \(100 in the United States costs 800 pesos in Mexico, and the current nominal exchange rate is 10 pesos per U.S. dollar. Over the next five years, the cost of that market basket rises to \)120 in the United States and 1,200 pesos in Mexico, although the nominal exchange rate remains at 10 pesos per U.S. dollar. Calculate the following.
a. The real exchange rate now and five years from now, if ' 'today's price index in both countries is 100
b. Purchasing power parity today and five years from now
Question: Why would Abenomics lead to a weaker yen?
Which of the balance of payments accounts do the following events affect?
a. Boeing, a U.S.-based company, sells a newly built airplane to China.
b. Chinese investors buy stock in Boeing from American residents.
c. A Chinese company buys a used airplane from American Airlines and ships it to China.
d. A Chinese investor who owns property in the United States buys a corporate jet, which he will keep in the United States so he can travel around America.
Question: Why is a weaker yen good for the profits of Japanese auto companies?
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