Tutorial 11_2010 _answers_

Tutorial 11_2010 _answers_ - ECON1002 Introductory...

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ECON1002 Introductory Macroeconomics, S2 2010 Tutorial Tasks 1 R EADING G UIDE : BOF C HAPTER 16. Y OU SHOULD ALSO LOOK OVER YOUR LECTURES NOTES FOR W EEK 11. T HE FOLLOWING READINGS ( ALL AVAILABLE THROUGH B LACKBOARD ) WILL BE USEFUL . K EY C ONCEPTS : N OMINAL AND R EAL E XCHANGE RATES , P URCHASING POWER PARITY , E QUILIBRIUM EXCHANGE RATES , THE R ELATIONSHIP BETWEEN M ONETARY POLICY AND E XCHANGE RATES . P ROBLEMS N OTE THAT P ROBLEMS 2 AND 3 ARE AVAILABLE FOR STUDENTS PRESENTATION . 1. How would each of the following be likely to affect the value of the dollar, all else being equal? Explain. a. Australian shares are perceived as having become much riskier financial investments. b. European computer firms switch from Australian-produced software to software produced in India, Israel and other nations. c. As East Asian economies recover, international financial investors become aware of many new, high-return investment opportunities in the region. d. The Australian government imposes a large tariff on imported automobiles. e. The Reserve bank reports that it is less concerned about inflation and more concerned about an impending recession in Australia. f. Australian consumers increase their spending on imported goods. T UTORIAL 11* (Week 12: beginning 18 th October)
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ECON1002 Introductory Macroeconomics, S2 2010 Tutorial Tasks 2 2. A British-made car is priced at 20,000 pounds and a comparable Australian-made car costs $26,000. One pound trades for $1.50 in the foreign exchange market. Find the real exchange rate for cars from the perspective of Australia and from the perspective of Great Britain. Which country’s cars are more competitively priced? 3. The demand for and supply of shekels in the foreign exchange market is Demand = 30000 – 8000 e Supply = 25000 + 12000 e , where the nominal exchange rate is expressed as dollars per shekel.
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Tutorial 11_2010 _answers_ - ECON1002 Introductory...

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