PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 17, Problem 8RQ
To determine
Contrast the fixed and flexible exchange rate.
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Suppose that on January 1, the dollar exchange rate with the yen is 1/120 $/Y.
Over the year, the Japanese inflation rate is 5%, and the US inflation rate is 10%.
If the exchange rate at the end of the year is 1$=130Y, does the yen appear to be
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were 10% and the US inflation rate were 5% over the year, instead? Explain why
your answer changes.
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Suppose the Australian dollar floats against the US dollar and the demand for Australian dollars in the foreign exchange market is given by Q = 125 - 50E where Q denotes the quantity of AUD and E denotes the nominal exchange rate expressed in USD per AUD. The supply of Australian dollars is given by Q = 25 + 50E. What is the equilibrium nominal exchange rate? 0.751.250.501.00
Chapter 17 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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