Assume UK inflation rate falls relative to US inflation rate. Other things being equal, how should this affect the (a) UK demand for Dollars, (b) supply of Dollars for sale, and (c) equilibrium value of Dollars? (Indicate with a single graph). Which currency is going to appreciate in this regard?
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Assume UK inflation rate falls relative to US inflation rate. Other things being equal, how should this affect the (a) UK demand for Dollars, (b) supply of Dollars for sale, and (c) equilibrium value of Dollars? (Indicate with a single graph). Which currency is going to appreciate in this regard?
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- (b) Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. (i) What is the nominal exchange rate? Use the expression: ereal= enor*P / Pfor where ereal is real exchange rate, enor is nominal exchange rate, P is domestic price level and Pfor is foreign price level. (ii) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change?What is the value of year 4's output in nominal dollars?Over the last 10 years, the average rate of inflation has been 1.51%. What is the purchasing power of a dollar today in terms of what a peso could purchase in 2012?
- In the last 4 years, the exchange rate Pound to Euro depreciated (decreased) to an average of 1.13 (from 1.30 before 2016). When citizens from the UK would go on holidays in a Euro zone country (e.g. Spain), would a lower exchange rate of 1.13(Sterling Pound to Euro) instead of an exchange rate of 1.30 (Pound to Euro) be of advantage or disadvantage for British tourists in Europe? Explain.The nominal exchange rate of the Australian dollar is 0.67. The CPI in the US is 300 and the same basket costs 430 in Australia. (a) What can you say about the purchasing power parity holding for Australia? Show calculation. Answer: 0.96 (b) The nominal Australian GDP is $1.5 trillion. Find Australia’s purchasing power parity GDP. Which one is more relevant for most purposes? What is the other one used for? Answer:1.56Suppose $2, 400 CAD could be used to purchase $2, 086.96 USD last year. Part (a): What was the nominal exchange rate last year? Be sure to quote your answer in the proper format (example: CAD = 1 USD). Roud your answer to the nearest cent (two decimal places: 0.50). Part (b): This year, if the exchange rate is $1.02 CA) = $1 USD, has the USD experienced a nominal appreciation or a nominal depreciation? Part (c): How will this change to the nominal exchange rate impact Canada's NX levels? Use a few sentences to explain how you arrived at this conclusion.
- Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥4,200,000. The exchange rate is ¥109.60/$. The forecast rate of inflation in the United States is 2.5% per year and is 1.5% per year in Japan. Use this data to answer the following questions on exchange rate passthrough. What was the export price for the Corolla at the beginning of the year expressed in the U.S. Dollars? Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? Assuming a 65% pass-through of the exchange rate, what will be the dollar price of a Corolla at the end of the year?New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall....a weak kiwi dollarmeans importing is more expensiveWhile we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low, the slower it will take for those inflation rates to fall, ASB senior economist Mark Smith said Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c. a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "Interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy," saidSmithBut Finance Minister Grant…New Zealand dollar drops to lowest value against US dollar since 2020 (27/09/2022) The New Zealand dollar has dropped to its lowest value against its US equivalent since March 2020. The bad news for Kiwis is that it means it'll take longer for consumer price inflation to fall....a weak kiwi dollarmeans importing is more expensiveWhile we do expect inflation rates to slowly fall from here, the longer the New Zealand dollar remains low, the slower it will take for those inflation rates to fall, ASB senior economist Mark Smith said Six months ago the New Zealand dollar was US68.9c - now it's at US56.6c. a fall of 18 percent. Aotearoa's dollar is suffering because the US dollar is being pumped up by the US Federal Reserve lifting interest rates to tackle inflation. "Interest rates globally are going up, and when rates are going up, generally people tend to look to where their money will be safest, and at the moment it's certainly the US economy," saidSmithBut Finance Minister Grant…
- A South American country has had a high rate of inflation. Recently, its exchange rate was 15 cruzados per dollar; that is, one dollar will buy 15 cruzados. It is likely that the country will continue to experience a 25% inflation rate and that the U.S. will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many cruzados 5 years from now?In April 2016, the exchange rate for the Cog (the currency of Cogland) was 4,250 Cogs = £1. Inflation in the year to April 2017 was about 7% in Cogland and 2% in the United Kingdom. (a) If purchasing power parity held, what should have been the nominal exchange rate in April 2017? (b) The actual exchange rate in April 2017 was 5,750 Cogs = £1. What was the change in the real exchange rate?makes it harder to compare lira amounts from different times. We use _ to adjust figures so that they can be compared. For example, in September 1998 1 USD was 0.21 liras. Today the exchange rate is 8.5 liras to 1 USD. Was the Turkish lira really that much more valuable in 1998 than it is now? (If you do the inflation correction you will see that the lira was indeed 15% more valuable against the US dollar back then as compared to its current value.) A) Economic growth, the real GDP B) the CPI, inflation C) Inflation, the CPI D) Unemployment, the GDP Deflator E) Changes in prices, inflation