{"id":10038,"date":"2020-11-20T04:19:09","date_gmt":"2020-11-20T04:19:09","guid":{"rendered":"http:\/\/onlineclassesguru.com\/?p=10038"},"modified":"2020-11-20T04:19:09","modified_gmt":"2020-11-20T04:19:09","slug":"balance-of-payments-and-exchange-rates-introduction","status":"publish","type":"post","link":"https:\/\/onlineclassesguru.com\/index.php\/2020\/11\/20\/balance-of-payments-and-exchange-rates-introduction\/","title":{"rendered":"Balance of Payments and Exchange Rates Introduction"},"content":{"rendered":"<style type=\"text\/css\"><\/style><p>Names ___________________________________________________________________________________________________<\/p>\n<p>Answer all questions immediately below (5 points each, 60 points free! Happy Thanksgiving):<\/p>\n<p>1. ___________ 5. ___________<\/p>\n<p>2. ___________ 6. ___________<\/p>\n<p>3. ___________ 7. ___________<\/p>\n<p>4. ___________ 8. ___________<\/p>\n<p>For Questions 1-8: What will be the effect, ceteris paribus, on the market for the dollar (i.e., the market for the dollar, foreign currency\/$) for each of the following situations? For each of the following questions note what happens to the equilibrium exchange rate (e) and the equilibrium quantity of foreign exchange (QFE). State whether the variable has increased (), decreased (), or note if the effect is indeterminate because of contrary forces (); for instance, if one factor increases while another factor decreases it. Assume all changes are ceteris paribus. Example for an increase in the demand for foreign exchange: e, QFE. Choose from the options below and answer with the corresponding letter at the beginning of the assignment. Each answer below is used only once.<\/p>\n<p>a. e, QFE b. e, QFE c. e, QFE d. e, QFE? e. e, QFE? f. e?, QFE<\/p>\n<p>g. e, QFE h. e?, QFE<\/p>\n<p>See the above graphic for questions 1 and 2, illustrating two countervailing influences on the lira-dollar relationship.<\/p>\n<p>1. Turkey\u0092s inflation rate has dramatically decreased over the last year.[footnoteRef:1] What is the effect of this on the market for the dollar (?\/$)? [1: \u0093By a Thousand Cuts: Inflation in Turkey has Fallen Steeply,\u0094 The Economist (November 2, 2019).]<\/p>\n<p>FC\/$<\/p>\n<p>Supply of Dollars<\/p>\n<p>Demand for Dollars<\/p>\n<p>Q of Foreign Exchange Transactions<\/p>\n<p>______e (FC\/$) ________QFE<\/p>\n<p>2. Turkey\u0092s has cut their policy interest rate \u0093three times, by a cumulative ten percentage points\u0094 over the last four months.[footnoteRef:2] What is the effect of this on the market for the dollar (?\/$)? [2: \u0093By a Thousand Cuts: Inflation in Turkey has Fallen Steeply,\u0094 The Economist (November 2, 2019).]<\/p>\n<p>FC\/$<\/p>\n<p>Supply of Dollars<\/p>\n<p>Demand for Dollars<\/p>\n<p>Q of Foreign Exchange Transactions<\/p>\n<p>______e (FC\/$) ________QFE<\/p>\n<p>3. Argentina has imposed capital controls on its citizens. \u0093From now on ordinary Argentines\u0092 purchases of dollars will be capped at $10,000 a month.\u0094[footnoteRef:3] This will overall decrease the demand for dollars. What is the effect of limiting Argentines\u0092 purchases of dollars on the market for the dollar (peso\/$)? Assume no change in US purchases of pesos. [3: \u0093Argentina\u0092s beleaguered government imposes capital controls,\u0094 The Economist (September 2, 2019).]<\/p>\n<p>FC\/$<\/p>\n<p>Supply of Dollars<\/p>\n<p>Demand for Dollars<\/p>\n<p>Q of Foreign Exchange Transactions<\/p>\n<p>______e (FC\/$) ________QFE<\/p>\n<p>4. \u0093Last week the US slapped fresh import tariffs on Mexico\u0092s $2bn tomato industry after the two countries failed to reach a deal on trade.\u0094[footnoteRef:4] Assume no change in Mexican tariffs on US goods. What is the effect on this on the Market for the dollar (peso\/$)? [4: Nikou Asgari and Jude Webber, \u0093Salad days in doubt as US-Mexico friction hits imports,\u0094 Financial Times (May 14, 2019).]<\/p>\n<p>FC\/$<\/p>\n<p>Supply of Dollars<\/p>\n<p>Demand for Dollars<\/p>\n<p>Q of Foreign Exchange Transactions<\/p>\n<p>______e (FC\/$) ________QFE<\/p>\n<p>See the following graphic for question 5.<\/p>\n<p>Image result for Kindleberger and world trade<\/p>\n<p>5. During the Great Depression, there was a dramatic decline in World trade, from 3 billion to less than 1 billion. Both US imports and exports dramatically declined. What is the effect of this on the market for the dollar (foreign currency\/$)?<\/p>\n<p>FC\/$<\/p>\n<p>Supply of Dollars<\/p>\n<p>Demand for Dollars<\/p>\n<p>Q of Foreign Exchange Transactions<\/p>\n<p>______e (FC\/$) ________QFE<\/p>\n<p><center><a href=\"http:\/\/onlineclassesguru.com\/orders\/ordernow\"><img decoding=\"async\" src=\"https:\/\/encrypted-tbn0.gstatic.com\/images?q=tbn:ANd9GcTyj99p60XCLyLk1htB7-1neRt8-2QdnenNlQ&usqp=CAU\"target=\"_http:\/\/onlineclassesguru.com\/orders\/ordernow\"\/><\/center><p>","protected":false},"excerpt":{"rendered":"<p>Names ___________________________________________________________________________________________________ Answer all questions immediately below (5 points each, 60 points free! Happy Thanksgiving): 1. ___________ 5. ___________ 2. ___________ 6. ___________ 3. ___________ 7. ___________ 4. ___________ 8. ___________ For Questions 1-8: What will be the effect, ceteris paribus, on the market for the dollar (i.e., the market for the dollar, foreign currency\/$)&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-10038","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Balance of Payments and Exchange Rates Introduction - onlineclassesguru<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/onlineclassesguru.com\/index.php\/2020\/11\/20\/balance-of-payments-and-exchange-rates-introduction\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Balance of Payments and Exchange Rates Introduction - onlineclassesguru\" \/>\n<meta property=\"og:description\" content=\"Names ___________________________________________________________________________________________________ Answer all questions immediately below (5 points each, 60 points free! 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