Demand for a country's currency in the foreign exchange market is given by where XR is...
- Demand for a country's currency in the foreign exchange market
is given by
where XR is the US dollar price of the currency, and A is the quantity of the currency.
- Supply for Country A's currency in the foreign exchange market
is given by
- The central bank of the country fixes the exchange rate at 62 USD.
The central bank needs to sell A = ________ in the foreign exchange market to maintain the fixed exchange rate.
[Fill in the blank with ONLY numerical values. For example, if the central bank needs to sell 100 units of the domestic currency, enter 100.]
Homework Answers
The Demand of country's currency = XR=200-0.5A
where,A is quantity of currency,XR is US Dollar price.
The central bank wants to the exchange rate at 62 USD
Lets calculate the demand for currency
XR=200-0.5A
62=200-0.5A
0.5A= 200-62
A= 138/0.5=276
Supply of country's currency
XR=10+0.5A
62=10+0.5A
62-10=0.5A
A= 52/0.5=104
Hence Demand is more and supply of the currency is less. So the price of USD is likely to increase
So in order to manitain the exchange rate at 62 USD
The cenral bank needs to sell A=(276-104) 172 in order to manitain the fixed exchange rate.
So that supply icreases and exchange rate reamins constant.
Add Answer to:
Demand for a country's currency in the foreign exchange market
is given by
where XR is...
The sum of currency and bank deposits at the central bank is called: a. the money...
The sum of currency and bank deposits at the central bank is called: a. the money supply. b. domestic assets. c. the monetary base. d. fractional reserves. Official intervention in the foreign exchange market to defend a fixed exchange rate when the value of the country's currency is under downward pressure causes a. international reserve holdings to rise. b. a downward pressure on the country's interest rates. c.an increase in the liabilities of the central bank. d. the domestic money...
. Consider a foreign economy with current exchange rate of 100 units of currency per 1 USD. Inves...
investors can buy a US paying 3
urgent please answer
. Consider a foreign economy with current exchange rate of 100 units of currency per 1 USD. Investors can buy a US bond paying 3% for a year or can by a foreign bond (with equivalent risk) paying 5% for a year. a. What exchange rate in a year's time would make investors indifferent between investing in the US or foreign country? b. Suddenly there is news that the foreign...
20. When a country's exchange rate depreciates, the price of: A: that country's goods abroad decreases...
20. When a country's exchange rate depreciates, the price of: A: that country's goods abroad decreases B: that country's goods abroad increases C: foreign goods sold in the country increases D: that country's goods produced and sold locally increases 21. A central bank may seek to influence its country's currency by: A: imposing limits on the number of goods that may be imported B: restricting the outflow of funds from the home country C: intervening directly in the FX market...
Consider this Central Bank balance sheet of a country with a fixed exchange rate. In order...
Consider this Central Bank balance sheet of a country with a
fixed exchange rate. In order to maintain the peg, the bank
intervenes in the foreign exchange market and sells $500 of
foreign bonds for domestic currency.
a) As a result of the intervention, has the domestic money
supply increased or decreased?
b) By how much? (no decimals)
c) What must the Central Bank do to sterilize this
intervention?
A. Buy $500 of foreign assets.
B. Sell $500 of foreign...
Indirect Quote: An exchange rate given in terms of the number of units of foreign currency for one unit of the domestic...
Indirect Quote: An exchange rate given in terms of the number of units of foreign currency for one unit of the domestic currency. Question: In other words, from a US context, how many units of Japanese yen (foreign currency) will my one US dollar (domestic currency) buy on November 5, 2019? (Cite your source)
Currency speculation takes place when Multiple Choice the exchange rate at which a foreign exchange dealer...
Currency speculation takes place when Multiple Choice the exchange rate at which a foreign exchange dealer will convert one currency differs on a particular day. the growth in a country's money supply exceeds the growth in its output, leading to price inflation. the purchase of securities in one market are immediately resold in another to profit from a price discrepancy. there is a simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. there...
using the market for loanable Funds and the market for Foreign Currency exchange, How does an...
using the market for loanable Funds and the market for Foreign Currency exchange, How does an investment tax credit affect national saving, domestic investment, net capital outflow, the interest rate, the exchange rat, and balance? the trade
Consider a foreign economy with current exchange rate of 15 units of currency per 1 USD. Investors can buy a US bond paying 396 for a year or can by a foreign bond (with equivalent risk). a. If excha...
Consider a foreign economy with current exchange rate of 15 units of currency per 1 USD. Investors can buy a US bond paying 396 for a year or can by a foreign bond (with equivalent risk). a. If exchange rate one year forward is 16, what interest rate would make investors indifferent between investing in the US or foreign country? b. If forward exchange rate were 14, instead, what interest rate would make investors indifferent? 4.
Consider a foreign economy...
When the foreign exchange market determines the relative value of a currency, we say that the...
When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a pegged exchange rate regime. True False
Please explain using Mundell-Flemming model and Foreign exchange Market Model. Show graphs. Please answer part b...
Please explain using Mundell-Flemming model and Foreign
exchange Market Model. Show graphs. Please answer part b and
c.
3. (16 marks total) Consider the Mundell-Fleming short-run small open economy model, with ri.e., no risk premium), and r given exogenously (a) (5 marks) Suppose foreign governments undertake a fiscal expansion, which raises the world interest rate Assuming the domestic central bank is operating a flexible ex- change rate, use an IS'-LM' diagram to show what happens to output and the exchange...
The sum of currency and bank deposits at the central bank is called: a. the money supply. b. domestic assets. c. the monetary base. d. fractional reserves. Official intervention in the foreign exchange market to defend a fixed exchange rate when the value of the country's currency is under downward pressure causes a. international reserve holdings to rise. b. a downward pressure on the country's interest rates. c.an increase in the liabilities of the central bank. d. the domestic money...
investors can buy a US paying 3
urgent please answer
. Consider a foreign economy with current exchange rate of 100 units of currency per 1 USD. Investors can buy a US bond paying 3% for a year or can by a foreign bond (with equivalent risk) paying 5% for a year. a. What exchange rate in a year's time would make investors indifferent between investing in the US or foreign country? b. Suddenly there is news that the foreign...
20. When a country's exchange rate depreciates, the price of: A: that country's goods abroad decreases B: that country's goods abroad increases C: foreign goods sold in the country increases D: that country's goods produced and sold locally increases 21. A central bank may seek to influence its country's currency by: A: imposing limits on the number of goods that may be imported B: restricting the outflow of funds from the home country C: intervening directly in the FX market...
Consider this Central Bank balance sheet of a country with a
fixed exchange rate. In order to maintain the peg, the bank
intervenes in the foreign exchange market and sells $500 of
foreign bonds for domestic currency.
a) As a result of the intervention, has the domestic money
supply increased or decreased?
b) By how much? (no decimals)
c) What must the Central Bank do to sterilize this
intervention?
A. Buy $500 of foreign assets.
B. Sell $500 of foreign...
using the market for loanable Funds and the market for Foreign Currency exchange, How does an investment tax credit affect national saving, domestic investment, net capital outflow, the interest rate, the exchange rat, and balance? the trade
Consider a foreign economy with current exchange rate of 15 units of currency per 1 USD. Investors can buy a US bond paying 396 for a year or can by a foreign bond (with equivalent risk). a. If exchange rate one year forward is 16, what interest rate would make investors indifferent between investing in the US or foreign country? b. If forward exchange rate were 14, instead, what interest rate would make investors indifferent? 4.
Consider a foreign economy...
When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a pegged exchange rate regime. True False
Please explain using Mundell-Flemming model and Foreign
exchange Market Model. Show graphs. Please answer part b and
c.
3. (16 marks total) Consider the Mundell-Fleming short-run small open economy model, with ri.e., no risk premium), and r given exogenously (a) (5 marks) Suppose foreign governments undertake a fiscal expansion, which raises the world interest rate Assuming the domestic central bank is operating a flexible ex- change rate, use an IS'-LM' diagram to show what happens to output and the exchange...
Most questions answered within 3 hours.
-
Determine the temperature (in Celsius) at which 1.00 mole of an
ideal gas will have a...
asked 3 minutes ago -
[1] Household statistics include individuals living alone or in
groups in:
A) apartments.
B) military barracks....
asked 6 minutes ago -
What is the % w/v when 80 mL of a 2.0% solution is mixed with 50...
asked 9 minutes ago -
How can I solve the following using a TI83
Claim: Most adults would erase all of...
asked 22 minutes ago -
Analysis of 3-ethyl-3-buten-2-ol gave C, 72.13%; H, 11.92%.
Calculate the percent deviation of these results from...
asked 19 minutes ago -
Which VALS segment is most likely to have a top of the line
brand new (2015)...
asked 23 minutes ago -
Write a program to score the paper-rock-scissor game. Each of
two users types in either P,R...
asked 43 minutes ago -
Calculate the equillibrium constent K for a redox reaction that
has E°cell = -.98 V at...
asked 55 minutes ago -
A concave spherical mirror has a radius of curvature of
magnitude 19.6 cm.
(a) Find the...
asked 57 minutes ago -
3. draw a diagram of the magnetic field:
a. around a long straight wire with a...
asked 55 minutes ago -
If you titrated 30.0 mL of 0.1 M HCl with 0.1 M NaOH, indicate
the approximate...
asked 1 hour ago -
NADH passes electrons into the electron transport chain. List
the carriers that would receive the electrons,...
asked 1 hour ago