{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

ECON303 Tutorial 2 - Econ303 International Money and...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ303: International Money and Finance Tutorial 2 1. Imagine that everyone in the world pays a tax of t % on interest earnings and on any capital gains due to exchange rate changes. How could such a tax alter the analysis of the interest parity condition? How does the answer change if the tax applies to interest earnings but not to capital gains, which are untaxed? 2. Analyse how the current exchange rate between Home currency and Foreign currency will be affected in the following cases: a) A temporary decrease in demand for money in Home country. b) A temporary decrease in money supply in Foreign country. c) A permanent decrease in money supply in Foreign country. d) A change in expectations about monetary policy: Home country residents expect that the central bank will permanently increase money supply next quarter. 3. Suppose that country A’s expected inflation rate is 50% and country B’s expected
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}