Question

Due Tuesday Problem Set 7 Econ 2301 Feb 18 Name 1. If the exchange rate between the US and Mexico let's look at price of one dollar in Mexican pesos) changes from 12 pesos = $1 to 18 pesos = $1 (as happened between about 2013 and spring 2016), a. the dollar has appreciated in value b. the peso has depreciated in value c. the dollar has depreciated in value d. the peso has appreciated in value e. a and b are true f. cand d are true 2. To "demand a $" in a model in which there are only two countries, the U.S. and Mexico, means a. To have dollars and be willing to exchange them for pesos b. To have pesos and be willing to exchange them for dollars C. Something else (neither a norb are true) 3. The value of the dollar would appreciate as a result of a. An increase in the demand for dollars b. An increase in the demand for pesos C. A decrease in the supply of pesos 4. One reason the $ might appreciate is because a. Foreigners find the price level in their country falling while the price level in the U.S. is constant b. Foreigners find their economies are entering recessions and their output and incomes are falling so they wish to buy more goods from the U.S. c. Foreigners fear that their economies are not doing well and may be unstable (politically or economically), whereas the U.S. looks relatively prosperous and stable, so they seek to buy assets like stocks or real estate in the U.S. d. Foreigners fear that the U.S. economy is not doing well and may be unstable (politically or economically), whereas their own economy looks prosperous and stable, so they seek to buy assets like stocks or real estate in their own country 5. If the dollar appreciates (rises in value against another currency or other currencies) this causes: a. The relative price of U.S. goods to increase for foreigners b. The relative price of foreign goods to decrease for Americans c. U.S. exports to fall and U.S. imports to rise d. All of the above

Answer 1

AU O. Izhesos = $1 to 18 pesos = $1 - we have to give more pesos for the same dollar therefore dollar appreciates Ee leso deff depreciates aus e) a &b are true , demand a $1 Demand is only for things, we do not home Therefore, this means we have reso and we're willing to exchange it for dollars. Laus b CS Scanned with CamScanner

③ Pesos palar a Dollar 10 Demand for Dollar increases more comfort appreciates & Peso defereciates 10 Tauras al orientity of Pollars only of foreigners feel that their economy is failing and reconomy of us is booming, they would invest in us market e demand for $ would increase this will lead to appreciation of $. (ausse 2) 44 dоllом охино : Price of us goods will rise relatively e brict of foreign good would w tower for Anericans Us experts will fall came to enfonsine us goods) re . 1. US imports will rise (due to cheap foreign goods) Scanned Wansd CamScanner

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