Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / 1) Consider the dollar-yen exchange market, where the exchange rate represents the dollar price of one yen

1) Consider the dollar-yen exchange market, where the exchange rate represents the dollar price of one yen

Economics

1) Consider the dollar-yen exchange market, where the exchange rate represents the dollar price of one yen. The US is the demand side of the market and Japan is the supply side. In each of the following cases determine whether the exchange rate increases or decreases:

a) per capita income in the US increases

b) per capita income in Japan increases

c) US inflation is greater than Japan's inflation

d) there is an increase in US interest rates.

2. In each of the following cases, determine if the transaction is a debit or a credit to the US balance of payment Accounts and state whether the transaction is recorded under the Current Account or Capital Account:

a) We import goods totaling $300 million

b) We receive $20 million in income from foreign investments

c) A foreign company builds a manufacturing plant in the US for $200 million

d) The foreign sector buys $100 million in US corporate bonds

e) The US exports goods totaling $200 million

f) The foreign sector receives income of $50 million from their US investments

3) State where each of the following statements is true or false and explain why.

a) If a country tries to maintain a fixed exchange rate below equilibrium it will experience a balance of Payment Surplus.

b) According to Purchasing Power Parity Theorem, if the US has 6% inflation and Japan has 3% inflation the value of the dollar relative to the yen will increase by 3%

c) A nation's central bank can support balance of payment deficits indefinitely.

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE