The following graph shows the market for euros in terms of dollars. The market is initially in equilibrium at $2.00 per euro and 8 billion euros. Suppose an economic downturn in the United States leads to a drop in American incomes, causing imports from Europe to decline. On the following graph, show the effect in the market for euros of an economic downturn in the United States that leads to a drop in European incomes. 4.0 ?
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- The following graph shows the market for euros in terms of dollars. The market is initially in equilibrium at $1.00 per euro and 4 billion euros. Suppose an economic downturn in the United States leads to a drop in American incomes, causing imports from Europe to decline. On the following graph, show the effect in the market for euros of an economic downturn in the United States that leads to a drop in European incomes. DOLLAR PRICE OF EUROS 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25 0 0 1 Supply of Euros D₂ D₁ 2 3 4 5 6 QUANTITY OF EUROS (Billions of euros) 7 8 Under a system of flexible exchange rates, the dollar will depreciate $1.25 per euro. Sell dollars for euros in the foreign exchange market. Lower interest rates by way of monetary policy. Demand for Euros Subsidize the production of certain U.S. exports to Europe. Supply of Euros ? Now suppose that the United States maintains a fixed exchange rate of $1.00 per euro. Which of the following U.S. government policies would keep the…Suppose that the euro is trading at $1.50 per euro in the foreign exchange market. Next, suppose that the exchange rate falls to $1.26 per euro, due to falling interest rates in the eurozone. The following graph shows the supply and demand curves for dollars in the foreign exchange market. On the following graph, shift either the supply curve for dollars or the demand curve for dollars to reflect the influence of "carry trade" (in isolation from other factors that may affect the exchange rate) on the exchange rate for dollars. (Hint: Carefully consider which price is measured on the vertical axis and which currency is being measured on the horizontal axis.) PRICE OF DOLLARS (euros per dollar) QUANTITY (dollars) Saly Dollar Solare ?The following graph depicts the supply and demand curves for U.S. dollars in the foreign exchange market. Suppose that Japan puts quotas on all U.S. imports. On the graph, shift either the supply of dollars curve, the demand for dollars curve, or both curves to best reflect the given scenario. PRICE (Yen per dollar) S D QUANTITY OF DOLLARS (Millions per day) If Japan puts quotas on all U.S. Imports, the U.S. dollar 6.4.
- Use the following table, which shows the supply and demand schedules for the euro, to answer the next question. Quantity of Euros Price Supplied 400 360 300 286 267 Multiple Choice $1.10 1.00 0.90 0.80 0.70 O If the U.S. government decides to fix or peg the price of the euro at $1.00, it would have to buy 360 euros. sell 160 euros. buy 100 euros. Quantity of Euros Demanded 100 sell 360 euros. 200 300 400 500Suppose the Canadians suddenly have a switch in taste from Japanese automobiles to American automobiles. On the following graph, indicate what happens to the demand for U.S. dollars in the market for foreign-currency exchange as a result of this change in tastes. Real Exchange Rate Supply Quantity of Dollars Demand Demand O Supply This causes the value of dollars in the market for foreign-currency exchange to I and the equilibrium quantity of net exports to Save & Continue Continue without savingPurchasing Power Parity (PPP) implies that the level of exchange rates adjusts so that identical goods cost the same amount in different countries. In many cases, the PPP is violated. Briefly explain drawing on the assumptions of absolute PPP. You are the trade advisor to a multinational company with an investment of US1,500,000. The following are the rates quoted on the FOREX market. US $ to Euro 1.22/€ US$ to pounds 1.84/£ Euros to pounds 1.54/£ Calculate the cross rate and determine if a profit opportunity exists. What is the value of that profit if you decide to trade with the US$1.5 million?
- Suppose that the exchange rate falls from 84 yen per U.S. dollar to 71 yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to sell in the foreign exchange market? The quantity of U.S. dollars that people plan to sell in the foreign exchange market A. decreases and the supply curve of U.S. dollars shifts leftward B. increases and the supply curve of U.S. dollars shifts rightward C. increases and a movement up along the supply curve for U.S. dollars occurs D. decreases and a movement down along the supply curve of U.S. dollars occursSuppose that the Japanese yen rises against the U.S. dollar-that is, it will take more dollars to buy a given amount of Japanese yen. Explain why this increase simultaneously increases the real price of Japanese cars for U.S. consumers and decreases the real price of U.S. automobiles for Japanese consumers. dollars, and the purchase of a U.S. As the value of the yen grows relative to the dollar, the purchase of a Japanese automobile priced in yen requires automobile priced in dollars requires yen. more fewerSuppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 0.75 eurosper U.S. dollar and today the U.S. dollar is trading at 0.80 euros per U.S. dollar. Which of the twocurrencies (the U.S. dollar or the euro) has appreciated and which has depreciated today?b) Suppose that the exchange rate for the Mexican peso fell from 15 pesos per U.S. dollar to 10 pesosper U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan tobuy in the foreign exchange market?c) Suppose that the exchange rate rose from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What isthe effect of this change on the quantity of U.S. dollars that people plan to sell in the foreignexchange market?
- According to a survey ("Big MacCurrencies," The Economist, April 17th 1993), in 1993, the average price of a Big Mac in the U.S. was $2.28. In Japan, Big Mac fans had to fork out ¥391 for this feast. What was the PPP implied exchange rate between the $ and the ¥?Suppose you independently contract as a software developer living in the United States, and you just sold a license for your latest program to a Belgian consumer for EUR 5,000. Determine the effects of this transaction on exports, imports, and net exports in the U.S. economy, and enter your results in the following table. If the direction of change is "No change," enter "0" in the Magnitude of Change column. Hint: The magnitude of change should always be positive, regardless of the direction of change. Exports Imports Net Exports Direction of Change Magnitude of Change (Euros) in U.S. net exports is matched by in U.S. net capital Because of the identity equation that relates to net exports, the outflow. Which of the following is an example of how the United States' net capital outflow might be affected in this scenario? Check all that apply. You store the euros in your safety deposit box at home. You purchase EUR 5,000 worth of stock in a Belgian corporation. You buy EUR 5,000 worth of…Economics The following graph shows exports from Japan as a function of the exchange rate. Exports from Japan Exports from Japan EXPORTS (Yen) Referring to the graph, why does the line showing exports from Japan slope downward? O The lower the price of the yen in terms of dollars, the lower the exports from Japan into the United States. O The higher the price of the yen in terms of dollars, the higher the exports from Japan into the United States. O The lower the price of the yen in terms of dollars, the higher the exports from the United States into Japan. O The lower the price of the yen in terms of dollars, the higher the exports from Japan into the United States. On the previous graph, adjust the position of the blue point (circle symbol) on the curve to show what happens when the exchange rate (measured in dollars per yen) decreases. (Note: Select and drag the blue point along the curve. The point will snap into position, so if you try to move the point and it snaps back to its…