ECON 214 InQuizitive Assignment 13 solutions complete answers

ECON 214 InQuizitive Assignment 13 solutions complete answers 

 

Fill in the blanks to complete the passage about international finance.

 

An – reflects the amount of one currency required to purchase one unit of another currency. To put it simply, it is the – of foreign currency. This rate is set by – in foreign exchange markets. When a currency becomes more valuable in the market, this is called –; when a currency becomes less valuable, this is called –.

 

Suppose that it currently costs 17 Mexican pesos to buy one U.S. dollar. With that as the reference point, decide whether each situation corresponds to a price above or below 17 pesos/dollar.

 

Fill in the blanks to complete the passage about balance-of-payments calculations.

 

Adding the current account balance to the capital account balance should always sum to –. This is because every transaction that transfers an asset in one direction transfers payment for the asset in the – direction. Thus, if the current account is in surplus, the capital account is in –. Currently, the United States holds a – account deficit and a – account surplus.

 

In an exchange of money between U.S. dollars and Turkish lira, if the exchange rate is 0.4 dollars per lira, what is the rate in liras per dollar?

 

Apply the correct label to indicate the result of each event for the dollars-per-yuan exchange rate between the United States and China.

 

In 2015, in the United States a Big Mac cost $4.79. Assuming purchasing power parity, what would a Big Mac have cost in Indian rupees, if the exchange rate was $0.016 per rupee? Round to three decimal places.

 

Identify which items are recorded in the capital account portion of the U.S. balance of payments, and which are recorded in the current account.

 

Which of the following would cause a rightward shift in the demand for Mexican pesos?

 

Choose the correct definition of purchasing power parity.

 

Shown is the capital account for 2014 for the fictional country of Balancia. Given these entries, what can we assume about the current account for the same year?

 

A desk costs $195 in the United States. The same desk costs 150 British pounds. If purchasing power parity holds perfectly, what is the exchange rate in dollars per pound?

 

If the personal savings rate in the United States declines, what happens to the U.S. current account deficit?

 

How does strong economic growth lead to current account deficits?

 

Three causes of current account deficits are listed below. Match each one to its explanation.

 

Match each currency with the county or countries that use it.

 

Fill in the blanks to complete the passage about the law of one price.

 

According to the law of one price, identical goods sold –must sell for the same price, except for costs associated with –. Those costs reflect – and the cost of shipping. According to the law of one price, if the price of a good in one location does not match the price of the same good in a different location, sellers will increase supply in the location where the good is – until prices in both locations are equal.

 

The U.S. trade deficit often increases during periods of strong economic growth.

 

Which of the following outcomes can we expect to result from the Chinese government intentionally devaluing the yuan?

 

Just as the demand for farm labor is derived from the demand for food crops, the demand for a currency is derived from the demand for goods priced in that currency.

 

Fill in the blanks to complete the passage about China’s monetary policy.

 

– exchange rates are rates fixed at a certain level through the actions of a government. – exchange rates are rates determined by natural market forces. Between 2008 and 2010, China pegged its currency to the – at a value consistently – what would have been the market-determined rate. The Chinese government did this so that Chinese goods and services would be – expensive on world markets.

 

What are some reasons why purchasing power parity does not hold perfectly in the short run?

 

Which of the following graphs best represents a fictional country engaging in exchange rate manipulation to intentionally devalue its currency, called the rallod?

 

A woven-leather chair costs $570 in the United States. If the exchange rate between U.S. dollars and Mexican pesos is $0.06 per peso, how much should the same chair cost in Mexico? Assume that purchasing power parity holds perfectly in this case.

 

Place each descriptive phrase on the correct side of the graph.

 

What is China’s post-2010 policy with regard to the yuan?

 

Suppose there is a shift in the international market for Japanese cars. Order the following events to show how a shift in consumer preferences can affect exchange rates.

 

Which three factors most directly affect the demand for a country’s currency on the international currency market?

 

Fill in the blanks to complete the passage about the impact of fiscal policy on the trade deficit.

 

Deficit spending requires borrowing, which the U.S. government does by selling Treasury securities. When those bonds are bought by –, the result is a positive contribution to the – account balance, which implies a negative contribution to the – account balance.

 

Calculate the current account balance if a small country exports $200 million in goods and services and imports $160 million, it receives $80 million in foreign aid and private charity (net), it pays $15 million to foreign citizens working locally, and its own citizens earn $36 million abroad.

 

Classify each transaction by the place in the U.S. balance of payments where that transaction would have an impact.

 

Fill in the blanks to complete the passage about the relationship between demand for a country’s goods and services and demand for a country’s currency.

 

A rise in demand for goods and services translates into – demand for the means of payment. A country’s goods and services must ultimately be paid for in the currency of the country where the goods or services are –. If the demand for the goods and services rises, that country’s currency – against other currencies.

 

For any exchange between two currencies, there are two different exchange rates, either of which can be used in currency exchange calculations.