MGEA06H3 Lecture Notes - Foreign Exchange Market, Shortage, Capital Market

60 views6 pages

bluetiger347

16 Jun 2013

School

UTSC

Department

Economics for Management Studies

Course

MGEA06H3

Professor

Iris Au

For unlimited access to Class Notes, a Class+ subscription is required.

selahanna2005 and 40086 others unlocked

MGEA06H3 Full Course Notes

Verified Note

2 documents

Document Summary

Thus, canadians need to covert c$ into foreign currencies when we imports stuffs: domestic purchases of foreign assets, the total supply of c$ = + = . Imports of goods and services: given the total demand for c$ = the total supply of c$, the foreign exchange market is in equilibrium (i. e. , in balance) and there is no pressure for the exchange rate to change. Suppose c$ appreciates (i. e. , it takes more foreign currencies to exchange 1c$): The goods market: appreciation of c$ makes canadian goods and services become more expensive for foreigners while foreign goods and services less expensive to canadians. while imports of goods and services , exports of goods and services . The capital market: the capital market tends not to be affected by the change in exchange rate. Therefore, the overall rate of return on canadian assets remains unchanged: note: you will learn more about this in upper level economics class.

Related Questions

All the questions from "Output, Exchange Rates, Macroeconomic Policy, and Open-economy IS-LM-FX Model."

Please answer these questions completely. It is important to me.

Thanks!

6. The TB (i.e., EX â IM) is part of the short-run spending equation. With sticky prices, what would be the effect on the TB with an increase (depreciation) of the home nation's exchange rate?

A. Consumers in the home nation would find it more expensive to buy domestic goods compared to foreign goods, and the trade balance would decrease.

B. Consumers in the home nation would cut back on both domestic and foreign goods and the trade balance would decrease.

C. Consumers in the home nation would increase spending on both domestic and foreign goods, and the trade balance would be unchanged.

D. Consumers in the home nation would increase spending on domestic goods and decrease spending on foreign goods, causing the trade balance to increase.

11. A shift to the left by the IS curve can be achieved by all of the following EXCEPT a(n):

A. decrease in government spending.

B. increase in taxes.

C. increase in the foreign interest rate.

D. decrease in future expected exchange rate Ee.

13. The LM curve will shift to the left, if there is a(n):

A. increase in money supply.

B. increase in interest rate.

C. decrease in money supply.

D. increase in output.

14. If taxes fall and foreign income falls, what will happen to output, ceteris paribus?

A. It will rise.

B. It will stay the same.

C. It will fall.

D. It is uncertain what will happen.

15. Using the IS-LM-FX framework, if we observe that income and interest rate both rise in the Eurozone, this could be the result of

A. contractionary monetary policy pursued by the European Central Bank.

B. expansionary monetary policy pursued by the Federal Reserve System (U.S. central bank).

C. a stock market crash in the Eurozone.

D. increases in government spending in the Eurozone.

18. Whenever U.S. government spending increases,

A. output will not change at all if the U.S. fixes the exchange rate of dollar against major currencies.

B. output will increase by a larger amount when dollar floats than when dollar pegs to other currencies.

C. output will increase by a smaller amount when dollar floats than when dollar pegs to other currencies.

D. output will not change at all since the U.S. adopts a flexible exchange rate.

The US market of rice is described by the following domestic supply and demand equations: QdUS = 200 - 2 P, QsUS = -100 + 3 P where QdUS and QsUS represent the quantities demanded and supplied (in millions of tons) and P is the price per ton of rice (in hundreds of $).

a) What is the market equilibrium price of rice? How much rice is sold at this price (what is the market equilibrium quantity)? At this market price, what are the revenues for rice producers?

b) Now suppose that the US government wants to support US farmers' incomes using a price floor. Assume that the US government buys the surplus. If the price floor is 80, how much rice are US consumers buying? How much is the surplus? If the US government buys the surplus, what would be the cost of purchasing it? What would revenues be for rice growers?

c) But the US not only produces but also imports rice. Now assume that foreigners are allowed to sell rice in the US. Assume that the foreign supply equation is QsF = - 200 + 5P. What would be the new equilibrium price of rice in the US when rice imports are allowed? Draw in only one graph the equilibrium situation before and after rice imports.

d) At this new equilibrium price, how much rice will US farmers produce? How much will be consumed and how much will be purchased from abroad? Show your work.

roseminnow685

The largest corporation based in the United States is:

A) General Motors.
B) ExxonMobil.
C) General Electric.
D) Microsoft.

Service exports from the United States equal _____ per year.

A) less than $100 billion
B) approximately $250 billion
C) less than $350 billion
D) approximately $500 billion

In addition to agricultural products and manufactured goods, the United States is also the world's largest exporter of:

A) processed and packaged foods.
B) pharmaceuticals.
C) electronics.
D) business services and retailing.

Before entering a country, marketers need to determine if the country has the required _____ to support their marketing efforts.

A) moral code
B) legal system
C) infrastructure
D) trade bodies

In order for a marketer to operate efficiently in a foreign country, it is crucial that a stable _____ be in place to facilitate trade.

A) free trade agreement
B) tariff
C) infrastructure
D) labor force

Which of the following is not a trade barrier to an exporter?

A) Tariffs
B) Import quotas
C) Subsidies
D) Related party trade

A complete ban on the import of a product is known as a(n):

A) import quota.
B) embargo.
C) revenue tariff.
D) protective tariff.

Exchange control is an administrative barrier to international trade that:

A) requires companies that export to sell foreign currencies to the central bank or other foreign agency, and importers to buy foreign currencies from the same organization.
B) supports domestic industry through grants of money or research support.
C) completely bans the importation of a product.
D) sells products in a foreign market cheaper than they are sold domestically.

When a group of nations agree to the free trade of goods among themselves by abolishing tariffs and trade restrictions, the nations have created a:

A) common market.
B) customs union.
C) trading block.
D) free-trade area.

10.

Which of the following is not an objective of the European Union(EU)?

A) eventually remove all trade barriers to free trade among its members.
B) standardize currencies and regulations between member nations.
C) promote the basic tenets of the WTO and GATT treaty.
D) eventually evolve into an independent political entity.

11.

An organization that provides first-time exporters with expertise in locating foreign buyers, handling paperwork, and conforming to local labeling and testing laws is called a(n):

A) export facilitator.
B) export title company.
C) trade assistance corporation.
D) export management company.

12.

McDonald

ivoryturtle973

MGEA06H3 Lecture Notes - Foreign Exchange Market, Shortage, Capital Market

MGEA06H3 Full Course Notes

Document Summary

Get access

Related Documents

MGEA06H3 Study Guide - Final Guide: Money Supply, The Foreign Exchange, Currency Crisis

MGEA06H3 Lecture Notes - Demand Curve, Capital Outflow, David Buss

MGEA06H3 Lecture Notes - Kolmogorov Space, Consumption Function

Related Questions