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# final - Practice Exam for final Page 1 QUESTIONS 1 Answer...

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Page 1 Practice Exam for final

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Page 2 QUESTIONS 1 Answer all of the following questions. Show calculations and answers for full credit. (20 pts) 1. Suppose that original exchange rate of Pesos to Dollars is US\$2=P10. For some reason, the US dollar depreciates . a) (3 pts) Which of the following new exchange rates is consistent with a depreciation of the USA dollar? a. US\$ 1 = P 9 b. US\$ 4 = P 10 c. US\$ 2 = P 12 d. Can’t tell from the information given. b) (3 pts) Suppose the Mexican nominal exchange rate does not change, but prices rise faster abroad than in Mexico. What happens to the Mexican real exchange rate? (increase, decrease, or stay the same?) 2. (6 pts) Recently, the exchange rate between the euro and the dollar has changed from \$1.51 per Euro to \$1.23 per Euro. What effects do you expect on GDP and net exports in Europe and America? US Net Exports: Europe Net Exports: US GDP: Europe GDP: 3. (3 pts) Suppose a Big Mac sells for \$2 in the USA and for 12 Swedish Kronas (SEK) in Sweden, and the nominal exchange rate is \$1 = SEK 7. What is the real exchange rate? 4. (5 pts) Given the prices of the Big Mac from question 29, what should the nominal exchange rate be for purchasing power parity to hold?
Page 3 QUESTIONS 2 Answer all of the following questions. Show calculations and answers for full credit. (20 pts)

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final - Practice Exam for final Page 1 QUESTIONS 1 Answer...

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