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Which of the following transactions would contribute to a US current account surplus and why? Make sure that you justify, in each case, why the transaction would or would not contribute to a current account surplus.
a. IBM barters computers worth $100 million to Jamaica in exchange for hotel service worth $100 million on the island.
b. The US borrows $100 million long term from Europe to buy $100 million of European goods this year.
c. The US sells arms worth $100 million to Israel for bank deposits worth $100 million.
d. The US government makes a gift of $100 million to the government of Colombia, in the form of New York bank deposits, to pay for damages caused by US bombings in heroin plantations.
e. The European Central Bank buys $100 million in US-dollar bank deposits from a New York bank, paying by providing euro bank deposits to the New York bank.
A European Call Option on a non dividend paying stock where stock value is $40, the strike price is $40, the risk-free rate is 4 percent per annum, the volatility is 30 percent per annum,
The consumption function is given by C = 200 + 0.75(Y - T ). The investment function is I = 200 - 25r, r is the real interest rate. Government buy and taxes are both 100.
Smith is a currency trader and reviewing forward foreign exchange rates. His investors have made several statements regarding foreign exchange rates.
Suppose that the spot value of the British pound is $1.55, the annualized thirty day sterling interest rate is 10 percent, the annualized 30-day U.S. interest rate is 8.5 percent,
The firm produces a global positioning system that sells for $1,000 with costs of goods sold of 48 percent of sales. Compared to the US, China offers a 6 percent cost reduction
The Biltmore Garage has lights in places that are difficult to reach. Management estimates that it expenses about $2 to change a bulb. Standard one hundred-watt bulbs with an expected life of 1000 hours.
Would the interest parity condition change if all foreign exchange transactions were subject to a one percent transaction fees? If not, explain your reasoning.
Assume you hear a commentator on radio state that when interest rates fall, the stock market (the Dow Jones average say) tends to rise.
Assume the free trade market price of a car is $10,000. It contains $5000 worth of steel. The importing country imposes 25 percent tariff on car imports.
Microeconomics is suppose to be the study of scarce resources. Here, consumers [both individuals and organizations] must make allocation decisions. These 3-basic trade offs include which goods or services are to be manufactured,
Suppose last year's real GDP was $7,000 billion, this years nominal GDP is $8,820 billion, and GDP-deflator for this year is 120. Determine the growth rate of real GDP?
Dumaine Equipment Corporation closes its books regularly on December 31, but at the end of 2007 it held its cash book open so that a favorable balance sheet could be created for credit purposes.
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