Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 21, Problem 2P
To determine
The balance on the financial account.
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Assume all transactions are between private individuals. A U.S. citizen buys a Japanese bond. This transaction will be entered in the US balance of payments as _______________.
a) an increase in investment income and an increase in foreign private assets in the US
b) a decrease in private US assets abroad and an increase in foreign private assets in the US
c) an increase in imports and an increase in foreign private assets in the US
d) an increase in private US assets abroad and an increase in foreign private assets in the US
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 10
11. Suppose that the nominal exchange rate between the euro and the British pound
was €0.80 per £1.0 last year, one unit of German output cost €4.0 last year, and one unit of
British output cost £6.0 last year.
a. What was last year's real exchange rate between the U.K. and Germany, expressed as the
cost of British output (i.e. - the quantity of German output that exchanges for 1 unit of
British output)? In which country were goods more expensive last year?
b. Suppose that between last year and this year the British pound depreciated by 25% against
the euro (a 25% decrease in the number of euros required to buy 1 pound). If the price of
goods in the U.K and Germany are unchanged from last year, what is this year's new real
exchange rate? In which country are goods more expensive this year?
Now suppose, instead, that between last year and this year, the pound depreciated by 25%
against the euro and Germany experienced a 40% decrease in its price level (a 40%
decrease in the number of…
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
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- Question: Consider the figure below. Which of the following statements is WRONG? 5, 00 D, a) Ds 0 Q1 Q2 Foreign exchange A current account deficit will be equal to capital account surplus as long as reserves increase. O b. If a country's currency experiences significant lose of value, its exports will increase, imports decline and country will need less capital inflows. A country will experience current account deficit as long as imports are lower than imports, reserves remain the same and the statistical discrepancy is zero. d. A country will experience capital account surplus as long as exports are higher than imports, reserves remain the same and the statistical discrepancy is zero.arrow_forwardSuppose that the current Canadian dollar (CAD) to U.S. dollar exchange rate is $0.85 CAD = $1 US and that the U.S. dollar price of an Apple iPhone is $300. What is the Canadian dollar price of an iPhone? Next, suppose that the CAD to U.S. dollar exchange rate moves to $0.96 CAD = $1 US. What is the new Canadian dollar price of an iPhone? Other things equal, would you expect Canada to import more or fewer iPhones at the new exchange rate?arrow_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_forward
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