2011 HW 6 Fall

2011 HW 6 Fall - True False or Uncertain Why 4 For each of...

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Seongjae Lee Money, Banking and Financial Markets Problem set #6 Due: October 19, 2011 Questions 1. In the WSJ for Tuesday, October 18 compare the exchange rate per US dollar with the foreign currencies of Brazil, Canada, China, Japan, Mexico, UK, Switzerland and the Euro with the exchange rates given in the "Tools of the Trade" box on page 237 of the text. Has the dollar appreciated or depreciated against these currencies since January 21, 2010 (and by what percent has each changed). Currency per US $ Book WSJ for Oct 18, 2011 Appreciated (A) % Chg Depreciated (D) Brazil 1.8034 1.7369 -3.7% #DIV/0! Canada 1.0514 1.0236 -2.6% #DIV/0! China 6.8269 6.3808 -6.5% #DIV/0! Japan 90.4100 76.8300 -15.0% #DIV/0! Mexico 12.9618 13.4850 4.0% #DIV/0! Switzerland 1.0421 0.8992 -13.7% #DIV/0! UK 0.6173 0.6352 2.9% #DIV/0! Euro 0.7095 0.7280 2.6% 2. When the euro appreciates, are you more likely to drink California or French wine? Why? 3. A country is always worse off when its currency is weak (falls in value).
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Unformatted text preview: True, False or Uncertain. Why? 4. For each of the following situations (holding everything else constant) indicate how the supply / demand curves for U.S. dollars would move by writing the number of the new equilibrium position achieved in the space provided. Always start at go (no, you don't collect 200 points) for each situation ! European interest rates are expected to fall next year while inflation remains the same. The U.S. exports to Europe increase so the U.S. has a trade surplus. GDP growth in Europe falls to less than half of the U.S. GDP growth rate. Greece and Spain default on their sovereign debt. The U.S. becomes energy independent by converting to Natural Gas while the real interest rate in the U.S. doubles. 1 2 5 4 3 2 1 1 6 7 8 5 6 7 GO euro/$ Dollars...
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