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A country that has never had its own currency has formed a central bank and put you in charge of developing money. It needs to perform the necessary functions of any good currency efficiently (i.e., being a medium of exchange, a store of value, and a unit of account). Because your country is interested in trading with other members of the global economy, other nations must have faith in its fitness and the currency exchange markets must be willing to accept it. Though your answer needs to be correct in terms of economic theory (so be sure to read the assigned chapters), creativity and having fun with it is strongly encouraged.

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Yusra Anees
Yusra AneesLv10
28 Sep 2019

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Related questions

A country that has never had its own currency has formed a central bank and put you in charge of developing money. It needs to perform the necessary functions of any good currency efficiently (i.e., being a medium of exchange, a store of value, and a unit of account). Because your country is interested in trading with other members of the global economy, other nations must have faith in its fitness and the currency exchange markets must be willing to accept it. Though your answer needs to be correct in terms of economic theory (so be sure to read the assigned chapters), creativity and having fun with it is strongly encouraged.

Construct thoughtful, detailed responses to the answers contributed by at least three of your classmates.

Assessment of Future Exchange Rate Movements

As the chief financial officer of Blades, Inc., Ben Holt is

pleased that his current system of exporting “Speedos”

to Thailand seems to be working well. Blades’ primary

customer in Thailand, a retailer called Entertainment

Products, has committed itself to purchasing a fixed

number of Speedos annually for the next 3 years at a

fixed price denominated in baht, Thailand’s currency.

Furthermore, Blades is using a Thai supplier for some

of the components needed to manufacture Speedos.

Nevertheless, Holt is concerned about recent developments

in Asia. Foreign investors from various countries

had invested heavily in Thailand to take advantage of

the high interest rates there. As a result of the weak

economy in Thailand, however, many foreign investors

have lost confidence in Thailand and have withdrawn

their funds.

Holt has two major concerns regarding these developments.

First, he is wondering how these changes in

Thailand’s economy could affect the value of the Thai

baht and, consequently, Blades. More specifically, he is

wondering whether the effects on the Thai baht may

affect Blades even though its primary Thai customer

is committed to Blades over the next 3 years.

Second, Holt believes that Blades may be able to

speculate on the anticipated movement of the baht, but

he is uncertain about the procedure needed to accomplish

this. To facilitate Holt’s understanding of exchange

rate speculation, he has asked you, Blades’ financial analyst,

to provide him with detailed illustrations of two

scenarios. In the first, the baht would move from a current

level of $.022 to $.020 within the next 30 days.

Under the second scenario, the baht would move from

its current level to $.025 within the next 30 days.

Based on Holt’s needs, he has provided you with the

following list of questions to be answered:

1. How are percentage changes in a currency’s value

measured? Illustrate your answer numerically by

assuming a change in the Thai baht’s value from a

value of $.022 to $.026.

2. What are the basic factors that determine the value

of a currency? In equilibrium, what is the relationship

between these factors?

5. Assume that Thailand’s central bank wishes to

prevent a withdrawal of funds from its country in order

to prevent further changes in the currency’s value. How

could it accomplish this objective using interest rates

The largest corporation based in the United States is:

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

2.

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

3.

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.

4.

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

5.

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

6.

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

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

7.

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.

8.

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.

9.

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

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