Chapter_19_Key_Question_Solutions - 19-2(Key Question...

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Unformatted text preview: 19-2(Key Question) Indicate whether each of the following creates a demand for, or a supply of, European euros in foreign exchange markets:a.A U.S. airline firm purchases several Airbus planes assembled in France.b.A German automobile firm decides to build an assembly plant in South Carolina.c.A U.S. college student decides to spend a year studying at the Sorbonne in Paris.d.An Italian manufacturer ships machinery from one Italian port to another on a Liberian freighter.e.The United States economy grows faster than the French economy.f.A United States government bond held by a Spanish citizen matures, and the loan is paid back to that person.g.It is widely believed that the euro will depreciate in the near future.A demand for euros is created in (a),(c),(e), and (f), but see note below for e. A supply of euros is created in (b), (d), and (g).Note: Answer for (e) assumes U.S. demand for French goods will grow faster than French imports of U.S. goods.19-3(Key Question) Alpha’s balance of payments data for 2006 are shown below. All figures are in billions of dollars. What are (a) the balance on goods, (b) the balance on goods and...
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This note was uploaded on 07/14/2010 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.

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Chapter_19_Key_Question_Solutions - 19-2(Key Question...

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