Gordon_Answers11e_ch06

Gordon_Answers11e_ch06 - Chapter 6 International Trade,...

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Chapter 6 International Trade, Exchange Rates, and Macroeconomic Policy 57 ± Changes in the Eleventh Edition This chapter has gone through substantial changes from the earlier edition. The introductory section has been rewritten and changed significantly. As noted earlier, Section 6-2 has been moved to Chapter 5. Subsequent sections have been renumbered accordingly. Table 6-1 (previously 6-2), showing the daily quotation of foreign exchange rates, has been updated. Figure 6-2 (in Section 6-3) on U.S. dollar exchange rates against four major currencies has been updated to 2007, and now includes Euro instead of Switzerland. The IP Box on the Big Mac and purchasing-power-parity has been updated for the year 2007. Now it has six columns instead of four. Two additional columns are: Big Mac price in the local currency and Actual dollar exchange rate on July 2nd, 2007 . Figure 6-3, showing nominal and real exchange rates over time, has been updated to 2007. The case study of Asian intervention in foreign exchange markets that finance the U.S. current account deficits has been updated with new information about Chinese strategy regarding the exchange rate. Figure 6-4, on foreign official holdings of U.S. dollars, has been updated with a newer time period up to 2005. Figures 6-6 and 6-7 have both been updated to 2005. Section 6-9 has been modified significantly. The title of this section has been changed from “The IS-LM Model in a Small Open Economy” to “Effects of Monetary and Fiscal Policy with Fixed and Flexible Exchange Rates.” In Section 6-9, where the policy effectiveness is discussed in detail with reference to fixed and flexible exchange rate, all the figures (previously 6-8, 6-9, 6-10 and 6-11 in 10th edition) have been eliminated. This section has gone through substantial modification as the author has rewritten the major part of this section with further verbal explanation. He has referred the reader to the IS-LM diagrams (of Chapter 4) to analyze the impact of monetary and fiscal policy changes. And Section 6-11 from the 10th edition has been merged into the current Section 6-9 as the case of large open economy has been discussed in the same Section 6-9. And finally, in the Summary section, Ideas 1 and 2 are eliminated, and the rest of the ideas have been renumbered. ± Answers to Questions in Textbook 1. The dollar has appreciated against a currency if the number of units of that currency a dollar can purchase has risen over the last year. If the number of units of a currency that can be bought with a dollar has fallen over the course of a year, then the dollar has depreciated against that currency. 2. The demand for a country’s currency by foreigners (foreign exchange) is negatively sloped if the demand for that country’s exports is negatively sloped.
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This note was uploaded on 09/04/2010 for the course ECON 311 taught by Professor Gordon during the Spring '08 term at Northwestern.

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Gordon_Answers11e_ch06 - Chapter 6 International Trade,...

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