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If all European countries agree to levy an identical tax on the income earned by foreign capital, what are the consequences of the policy likely to be?
Explain why both a foreign asset acquired and a foreign liability reduced give rise to a debit entry in a nation's balance of payments.
Distinguish between autonomous and accommodating transactions in the balance of payments. What is the purpose of the distinction?
What would you expect to happen to Malaysia's recorded current account results in the next year or so? Why?
If silver were substituted for gold in this fixed exchange rate regime, what would happen to the band within which exchange rates could move? Why?
How exactly can you use the forward exchange market to protect yourself against exchange rate risk?
If the spot exchange rate is $0.50 = DM 1.00, what should be the forward exchange rate? Explain why.
What does that imply about the markets expectations with regard to US and Japanese inflation? Why?
What factors would cause the premium or price of a 6-month sterling put option with a given strike price to rise from 1 cent to 3 cents?
What is the effect of a balance-of-payments surplus on a country's domestic money supply? How does this effect occur?
Why is the role of the terms of trade in current account determination of more concern to small developing countries than to larger developed countries?
Why is sterilization more difficult for a central bank when its country has a payments surplus than when it has a deficit?
What happens to the balance of payments of Country A? Why? How is it returned to equilibrium? What is the effect of this process on the rest of the world?
Under what circumstances would these changes parallel the needs of the domestic economy? When would these policy changes conflict with those needs?
Explain how payments adjustment would occur if Bulgaria started in equilibrium and then experienced a large increase in exports due to a boom in Germany.
Draw the supply and demand graphs for exports and imports for a small country that revalues. Do same for a larger country. Explain shifts that occur in lines.
Why do developing countries often find the macroeconomic policy requirements for success of a devaluation to be particularly painful and politically unpopular?
From the perspective of a monetarist, what is the only really important effect that a revaluation has on a surplus country?
What is the effect on Country A's macro economy of the adoption of an expansionary monetary policy by the rest of the world in a world of fixed exchange rates?
What are so-called heterodox adjustment programs? Are they a sound long-term approach?
If only the income effect is operating, what would the effect be on X's balance of trade of an increase in domestic investment of $200 million? Explain.
Use the IS/LM/BP graph to show why a domestic monetary contraction will not be effective if a fixed exchange rate is maintained.
If a flexible exchange rate exists, explain what would happen and how equilibrium would be restored.
What effect does the adoption of a flexible exchange rate have on the impacts of fiscal policy shifts in a country whose capital markets are closely integrated.
Why is the mercantilist argument for protection weakened by the adoption of a flexible exchange rate?