studyquest.docx - 1 a Think about the exchange rate market...

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studyquest.docx

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1 .   a) Think about the exchange rate market for U.S. $ and U.K . Pounds . Draw and show how do positive changes in U.K. income affect the exchange rate of U.S. $ against the U.K . Pound ? Use graphs to illustrate your answers … b ) Suppose that inflation in the U.S. is 2 percent and 5 percent in the U.K . Show what would happen to the dollar / pound exchange rate ? 2 . Suppose the Turkish central bank declared that it would tighten its monetary policies for Turkish economy . Explain in detail how this decision would affect the foreign exchange market for US $ in Turkey . Use graphs to illustrate your answers … 3 . Suppose that the Mexican central bank increases Mexico ’s money supply . Show the effects of this action on Mexican interest rates and the dollar - peso exchange rates . A deficit in a country ’s current account balance means that ___ _ ______.
a. out - payments are less than in - payments
b. in - payments are not related to out - payments *
c. out - payments are greater than in - payments
d. out - payments are the same as in - payments
1.a) Think about the exchange rate market for U.S. $ and U.K. Pounds. Draw and show how do positive changes in U.K. incomeaffect the exchange rate of U.S. $ against the U.K. Pound? Use graphs to illustrate your answers…b) Suppose that inflation in the U.S. is 2 percent and 5 percent in the U.K. Show what would happen to the dollar/pound exchange rate? 2. Suppose the Turkish central bank declared that it would tighten its monetary policies for Turkish economy. Explain in detail how this decision would affect the foreign exchange market for US $ in Turkey. Use graphs to illustrate your answers… 3.Suppose that the Mexican central bank increases Mexico’s money supply. Show the effects ofthis action on Mexican interest rates and the dollar-peso exchange rates. A deficit in a country’s current account balance means that __________.a.out-payments are less than in-paymentsb.in-payments are not related to out-payments*c.out-payments are greater than in-paymentsd.out-payments are the same as in-payments

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