Expected real interest rate-domestic currency appreciates

Assignment Help Business Economics
Reference no: EM131007680

Discuss/justify the following statement: “When a change in a country’s nominal interest rate is caused by a rise in the expected real interest rate, the domestic currency appreciates. When the change is caused by a rise in expected inflation, the currency depreciates.”

Reference no: EM131007680

Questions Cloud

Foreign exchange market to maintain balance : Explain how the balance of payments interacts with the supply and demand for the domestic currency in the foreign exchange market to maintain balance.
The economy is currently in short-run equilibrium : AD-AS Framework: Assume that the economy is currently in short-run equilibrium but is experiencing an inflationary gap. If you are a Classical economist and believe that the economy is self-regulating, graphically illustrate and explain how the econo..
Make an annual contribution : Suppose you make an annual contribution of $100 each year to a college education fund for a niece. She is 4 years old now, and you will start next year and make the last deposit when she is 18. The fund is a money market account earning 6.5%/year. Wh..
Strategic management typically evolve in corporation : Why has strategic management become so important today's corporations and how does strategic management typically evolve in a corporation?
Expected real interest rate-domestic currency appreciates : Discuss/justify the following statement: “When a change in a country’s nominal interest rate is caused by a rise in the expected real interest rate, the domestic currency appreciates. When the change is caused by a rise in expected inflation, the cur..
What is the net present value if the cost of capital : Schaefer Organic Farms purchased a new tractor at a cost of $80,000. Annual operating cash inflows are expected to be $30,000 each year for four years. At the end of the tractor's useful life, the salvage value of the tractor is expected to be $5,000..
Annual growth rate of GDP per capita : Suppose that in a particular country, GDP per capita was $ 10,000 in 1960 and $ 40,000 in 2008. Using the rule of 72 (not a calculator), approximate the annual growth rate of GDP per capita.
Explain why strict liability should : In 1191, Three-year old Douglas Moore was playing with one of BIC’s lighters. While playing with the lighter, he started a fire that severely injured his 17-month-old brother. BIC Manufactures Inc. Included several child-safety warning labels on thei..
The number of books published per capita : Do the following variables have a positive, negative, or roughly zero correlation in a cross- section of countries: GDP per capita and the number of books published (hard copy + electronically) per capita?

Reviews

Write a Review

Business Economics Questions & Answers

  What is the exchange rate between the euro

a comparable hotel room in Hanover, Germany, costs 200 euro. A) Which hotel room is cheaper for a U.S. Tourist? B) What is the exchange rate between the euro and the British pound?

  How this arrangement with delta and united could have caused

how this arrangement with Delta and United could have caused the value of SkyWest to increase so dramatically even though it limited the amount of profit the company could earn.

  The fair labor standards act

The Fair Labor Standards Act, enacted in 1938, requires that firms pay "double time", which is 200% of the regular wage rate, for overtime work. This question asks you to consider some of the incentive effects of overtime pay. When faced with the bud..

  What direction changes net exports and net capital outflow

Suppose that Bill, a resident of the U.S., buys software from a company in Japan. Explain why and in what direction this changes U.S. net exports and U.S. net capital outflow.

  Illustrate what were the economic incentives for producers

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, Illustrate what were the economic incentives for producers.

  Qassume that you live in a simple economy in which only

q.assume that you live in a simple economy in which only three goods are produced and traded fish fruit and meat.

  Explain why someone buying long-term bonds yielding

A Wall Street Journal offered the following opinion of the bond market in September 2012, when inflation rate was about 2%: “Someone buying long-term bonds yielding 1.5% or 2% and then seeing consumer price inflation of 4%, will be on the losing end ..

  Market inverse demand function

Suppose a single firm produces all of the output in a contestable market. The market inverse demand function is P = 250 -5Q, and the firm’s cost function is C(Q) = 6Q. Determine the firm’s equilibrium price and corresponding profits.

  Making regulated monopolies adopt marginal cost pricing

An argument for making regulated monopolies adopt marginal cost pricing is that this would:

  Correlation-slope of the line

If the correlation between x and y is 1, then the points in the scatter plot of y on x all lie on a single line with slope sy/sx.

  Find a symmetric nash equilibrium in mixed strategies

The payoff to a company that enters is its gross profit minus its entry cost, while the payoff to a company that does not enter is 60. Find a symmetric Nash equilibrium in mixed strategies.

  Decrease in productivity in country will cause

A decrease in productivity in a country will cause its currency to ________ because it produces goods at a ________ price, everything else held constant.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd