Q.1.2 An appreciation of the rand against the dollar: (2) (1) Will worsen the current account balance but improve domestic prices. (2) Improve the current account balance but worsen domestic prices. (3) Improve the current account balance as well as reduce domestic prices. (4) Worsen both the balance on the current account as well as domestic prices.

Q.1.2 An appreciation of the rand against the dollar: (2) (1) Will worsen the current account balance but improve domestic prices. (2) Improve the current account balance but worsen domestic prices. (3) Improve the current account balance as well as reduce domestic prices. (4) Worsen both the balance on the current account as well as domestic prices.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter11: Foreign Exchange, Trade, And Bubbles

Section: Chapter Questions

Problem 7MC

See similar textbooks

Similar questions

Q.1.5 An appreciation of the rand against the dollar: (1) Will worsen the current account balance but improves domestic prices; (2) Will improve the current account balance but worsen domestic prices; (3) Will improve the current account balance as well as improve domestic prices; (4) Will worsen both the balance on the current account as well as domestic prices.
Suppose that the U.S. dollar appreciates against the Japanese Yen. What will occur as a result? purchasing power parity will begin to hold U.S. exports to Japan will become cheaper and increase, imports from Japan to the U.S. will become more expensive and decline U.S. currency becomes over-valued relative to Japanese currency U.S. exports to Japan will become more expensive and decline, imports from Japan to the U.S. will become cheaper and increase
Suppose the dollar/franc exchange rate equals $0.50 per franc. According to the Purchasing Power-Parity theory, what will happen to the dollar’s exchange value under each of the following circumstances? a. The U.S. price level increases by 10 percent and the price level in Switzerland stays constant. b. The U.S. price level increases by 10 percent and the price level in Switzerland increases by 20 percent. c. The U.S. price level decreases by 10 percent and the price level in Switzerland increases by 5 percent. d. The U.S. price level decreases by 10 percent and the price level in Switzerland decreases by 15 percent.
Q.1.2 An appreciation of the rand against the dollar: choose the correct answer(a) Will worsen the current account balance but improve domestic prices. (b) Improve the current account balance but worsen domestic prices. (c) Improve the current account balance as well as reduce domestic prices. (d) Worsen both the balance on the current account as well as domestic prices.
Q.1.10 When the rand depreciates against the dollar: (1) The balance on the current account of the balance of payments worsens; (2) The South African Reserve Bank can influence the exchange rate by raising interest rates to attract foreign capital and thus strengthen the value of the rand; (3) The South African Reserve Bank can buy dollars to strengthen the value of the rand; (4) The South African Reserve Bank can take steps to limit the supply of dollars and in this way strengthen the value of the rand relative to the dollar.
Assume the United States has a trade surplus with Brazil and imposes new tariffs on Brazilian coffee, a major export to the United States. Describe the effect of the tariff on the equilibrium price and quantity of coffee in the United States. What affect will the tariff have on the current account balance in the United States? Explain. Brazil responds by imposing their own tariff on U.S.-made agricultural machinery. The Brazilian purchase of U.S. agricultural machinery is a debit to which subaccount of the Brazilian balance of payments? What will happen to the quantity of agricultural machinery produced by Brazilian manufacturers?
Suppose 55 percent of Mexico’s trade is with the United States, 20 percent of trade is with Canada, and the remainder of trade is with Brazil. Suppose also that the Mexican peso appreciates 20 percent against the U.S. dollar, depreciates 30 percent against the Canadian dollar, and depreciates 10 percent against the Brazilian real. By how much will Mexico’s trade-weight exchange rate appreciate or depreciate? Show your work.
Trinidad and Kenya are trading partners. The Kenyan economy is operating at full employment, and Kenya's current account balance is zero. A. Assume the exchange rate between the Trinidadian dollar (TD) and the Kenyan shilling (KS) changes from 1TD=82KS to 1TD=65KS. Does the KS appreciate or depreciate against the TD? B. Given your answer in Part A, will each of the following increase, decrease, or remain the same? i. The price of Kenyan goods in Trinidadian dollars ii. Kenya's net exports. C. Draw a single correctly labeled graph with the long run Phillips curve for Kenya. On the graph, show the new short run equilibrium as a result of the change in Kenya's net exports from Part Bii, labeled point X. D. Given your answer in Part Bii, will each of the following be in deficit, surplus, or zero for Kenya? i. Current account balance ii. Financial (capital) account balance
dollars? Show your calculations. 5) What are the main determinants of imports into the country? What are the main determinants of exports out? 6) What are the main factors affecting the US Dollar- EU Euro exchange rate/f 7) What are the causes of the persistent US trade deficit? 8) Should the US go back to the classical gold standard? Explain why returning to the gold standard is not a good idea.
The price of a laptop in Canada is C$1,000. The price of a car in Germany is 10 000 euros. The current exchange rate is 0.9 euros per Canadian dollar. If a laptop is exported from Canada to Germany with no barriers to trade, what will be the price of the laptop in Germany? If a car is imported to Canada from Germany with barriers to trade, what will be the price of the car in Canada? Suppose the Canadian dollar appreciates by 10 percent against the euro. What will be the price of a computer exported from Canada change in Germany? Suppose the Canadian dollar appreciates by 10 percent against the euro. What will be the price of a car imported to Canada from Germany change in Canada?
What do the plus signs and negative signs signify in the U.S. balance-of-payments statement? Which of the following items appear in the current account and which appear in the capital and financial account? U.S. purchases of assets abroad; U.S. services imports; foreign purchases of assets in the United States; U.S. goods exports; U.S. net investment income. Why must the current account and the capital and financial account sum to zero?
Country Z exports $5 million of goods and services and imports $5 million of goods and services. It also has $10 million of foreign currency denominated foreign assets and $5 million of local currency denominated foreign liabilities both of which earn a fixed 5% return in their respective currencies.If the price elasticity of exports is 0.5 and the elasticity of imports is (-)0.4 what will happen to the current account if the exchange rate depreciates by 1%? Question 1Select one: a. it is unchanged b. improves by $0.005 million c. improves by $0.045 million d. improves by $0.055 million e. worsens by $0.005 million