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Explain how the nominal dollar/euro exchange rate would be affected by permanent changes in the expected rate of real depreciation of the dollar against euro.
Calculate the change in total revenue which is P times Q moving from P=10 to P=20. Repeat the same exercise for P=70 versus P=80.
What recommendation should be given to each state to maximize revenue?
Where should the demand expansion cause a greater real currency appreciation, in the tariff-using country or in the quota-using country?
How does this action change the long-run real exchange rate between the home and foreign currencies? How is the long-run nominal exchange rate affected?
Continuing with the preceding problem, discuss how the transfer would affect the long-run nominal exchange rate between the two currencies.
Can this policy be consistent with profit maximization? Explain.
Explain how permanent shifts in national real money demand functions affect real and nominal exchange rates in the long run.
Explain how you would figure out the dollar/pound exchange rate implied by PPP. When might it be a bad idea to use the PPP theory in this way?
Question: Describe how the necessity of a good and the availability of substitutions impact price elasticity.
Other things equal, how would you expect the following shifts to affect a currency's real exchange rate against foreign currencies?
Calculate your price elasticity of demand of apples. What can you say about your price elasticity of demand of apples?
Discuss why it is often asserted that exporters suffer when their home currencies appreciate in real terms against foreign currencies.
Why is the depreciation of capital good a cost of society? In what ways does a person's health depreciate?
According to relative PPP, what should happen over the year to the Swiss franc's exchange rate against the Russian ruble?
A. What is the estimated demand for the firm's product? B. Determine the point price elasticity. C. Determine the point income elasticity.
How might a zero interest rate complicate the task of monetary policy? Hint: At a zero rate of interest, there is no advantage in switching from money to bonds.
Why do governments typically institute currency reforms in connection with broader programs aimed at halting runaway inflation?
Does our discussion of money's usefulness as a medium of exchange? Why some currencies become vehicle currencies for foreign exchange transactions?
Beverage sales also increased from 300 to 600 units per day. Q1. Calculate the arc price elasticity of demand for appetizers.
What is the short-run effect on the exchange rate of an increase in domestic real GNP, given expectations about future exchange rates?
What kinds of changes in underlying conditions can cause the supply and demand curves to shift?
The velocity of money, V, is defined as the ratio of real GNP to real money holdings. What is the relationship between velocity and the exchange rate?
How would you expect a fall in a country's population to alter its aggregate money demand function?
Find a product that has not already been selected and describe the price elasticity and income elasticity.