Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 21.A, Problem 1ADQ
To determine
Comparison of Bretton woods system with the gold standard.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Consider the following scenario:
Soybeans
Textiles
Country A
O 100
O 150
O200
300
3
1
Country B
10
5
Suppose that w, $1000 and e=1 (e is the exchange rate). What is the maximum level of w, (expressed in $) such that these 2 countries trade
according to Comparative Advantage?
Assume that the U.S. interest rate is 12 percent, while the British interest rate is 15 percent. If interest rate parity exists, then: O a.U.S. investors will earn 12 percent whether they use covered interest arbitrage or invest in the United States. O b. U.S. investors will earn a higher rate of return when using covered interest arbitrage than what they would earn in the United States. O c. British investors who invest in the United Kingdom will achieve the same return as U.S. investors who invest in the United States. O d. U.S. investors will earn 15 percent whether they use covered interest arbitrage or invest in the United States.
The current exchange rate is £1.00 = $2.00. Compute the correct balances in Bank A's correspondent account(s) with Bank B if a currency trader employed at Bank A buys £45,000 from a currency trader at Bank B for $90,000 using its
correspondent relationship with Bank B:
O a. Bank A's pound-denominated account at B will rise by £45,000.
O b. Bank B's dollar-denominated account at A will fall by $90,000.
O c. Bank B's pound-denominated account at A will rise by £45,000.
O d. Bank A's dollar-denominated account at B will rise by $90,000.
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
Knowledge Booster
Similar questions
- A family from the US is planning a vacation in Peru for the winter holidays. The current exchange rate is $1 US buys 4.04 Peruvian soles. If the family figures that they need exactly 15,392.4 soles in Peru for their vacation, how many US dollars should they convert? O $3,444 $3,810 $4,112 $4,440arrow_forwardSuppose that a Big Mac in the US costs $3.15 and 2.99 Bolivianos in Bolivia. The currency exchange rate is $1 US buys 6.54 Bolivianos. According to the law of one price, the exchange rate should be $1 US buys Bolivianos and so, over time, the US dollar should O 0.95; appreciate O 0.95; depreciate 9.49; appreciate 9.49; depreciatearrow_forwardQUESTION 9 Honduras is on a fixed exchange rate with the U.S. The exchange rate is 3.0 pesos to the U.S dollar. Domestic credit is 40 and the money supply is 100. The backing ratio is. O 0.3 0.4 0.6 O 0.2 O We do not have enough information QUESTION 10 Honduras forms a currency board. Given the information in 9, how much does it need to increase domestic credit to form a currency board. 60 40 -60 -50 O We do not have enough information.arrow_forward
- Say that in Miami, in Coral Gables, a big mac cost $4.25 and a large fries cost $2.50. In Japan, the total cost of a big mac and large fries is 81 Yen. The according to purchasing power parity, the exchange rate that equalizes purchasing power of this basket of goods is 8.5 О 12 O 6.5 O 10arrow_forward7. Previously metals are used as trading purposes. Both gold and silver are used as international means of payment and the exchange rates among currencies are determined by either their gold or silver contents. Suppose that the dollar was pegged to gold at S20 per ounce, the Japanese yen is pegged to gold at 120,000 yen per ounce and to silver at 8,000 yen per ounce of silver, and the Canadian dollar is pegged to silver at S$5 per ounce of silver. What would the exchange rate between the U.S. dollar and Canadian dollar be under this system?arrow_forward1.1. Kenya has a comparative advantage over Uganda in the production of sugar if it: (1) Is able to produce sugar at a faster rate than Uganda. (2) Produces sugar at a lower opportunity cost than Uganda. (3) Has the absolute advantage in sugar production. (4) Specialises in sugar production. Q.1.2 An appreciation of the rand against the dollar:(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.1.3 Which of the following will NOT cause a depreciation of the rand against thedollar?(1) A decrease in imports from the United States. (2) A decrease in exports to the United States. (3) A decrease in the number of tourists visiting South Africa from the UnitedStates.(4) An increase in the number of American investors selling…arrow_forward
- Suppose a basket of goods costs $50 in the U.S. and €20 in France. What exchange rate, in dollars per euro, would be consistent with purchasing power parity? O $1.50 O $0.40 O $2.50 O $2arrow_forwardSuppose a basket of goods costs $100 in the U.S. and €80 in Spain. If the exchange rate is $1.50 per euro, then the real exchange rate, in terms of U.S. baskets per Spanish basket, is O 0.8 O 0.9 O 1.1 O 1.2arrow_forwardDollars per Franc So .70 60 .50 40 Do D2 3 4 5 6 7 Quantity of Francs (Milions) Refer to Figure 14.1. Suppose that the United States increases its imports from Switzerland, resulting in a rise in the demand for francs from Do to D1. Under a floating exchange rate system, the new equilibrium exchange rate would be: Select one: а. $0.40 per franc b. $0.50 per franc С. $0.60 per franc d. $0.70 per francarrow_forward
- Using the table shown, what is the most current 6-month forward exchange rate shown for British pounds? Use a direct quote from a U.S. perspective and assume today is Tuesday. Country Britain (Pound) £ 1 Month Forward 3 Months Forward 6 Months Forward O $0.6024-£1.00 $1.66 €1.00 O $1.61-£1.00 $1.60-£1.00 O $1.00-£0.6024 U.S. $ equiv. Tuesday Monday 1.6000 1.6100 1.6300 1.6100 1.6300 1.6600 1.6600 1.7200 Currency per U.S. $ Tuesday Monday 0.6250 0.6211 0.6173 0.6024 0.6211 0.6173 0.6024 0.5814arrow_forwardMultiple choice question: 1 Kenya has a comparative advantage over Uganda in the production of sugar if it: (1) Is able to produce sugar at a faster rate than Uganda. (2) Produces sugar at a lower opportunity cost than Uganda. (3) Has the absolute advantage in sugar production. (4) Specialises in sugar production. Q.1.2 An appreciation of the rand against the dollar: (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.1.3 Which of the following will NOT cause a depreciation of the rand against thedollar?(2)(1) A decrease in imports from the United States. (2) A decrease in exports to the United States. (3) A decrease in the number of tourists visiting South Africa from the UnitedStates.(4) An increase in the number of American investors…arrow_forwardWhich of the following statement is incorrect? O Most of the answers are correct. O Diversifying investments across several countries often reduces risk. The absolute purchasing power parity theory posits that exchange rates are determined by the differences in the prices of a given market basket of traded goods and services when there are no trade barriers. O An exchange rate of two currencies found by using a common third currency is known as an interest rate. O Exchange rates can be expressed as the number of units of the domestic currency per one unit of the foreign currency.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education