Fixed exchange rate supply and demand questions, Macroeconomics

1.    Which function of money is disrupted as a result of high inflation? Why?

2.    The central bank of Fiji has issued $1,000,000 in Fijian dollars. What is the size of money supply in this country if

a)    Fijians have deposited none of the currency in Fijian banks?

b)    Fijians have deposited all of the currency in Fijian banks and the banks have a 100% target reserve ratio?

c)    Fijians have deposited 50% of the currency in Fijian banks and the banks have a 50% target reserve ratio and are fully loaned up?

d)    Fijians have deposited 50% of the currency in Fijian banks and the banks have a 5% target reserve ratio and are fully loaned up?

(Hint: Keep in mind that money supply consists of currency and demand deposits.)

3.    Use a money market diagram (MD and MS) to illustrate and explain the effect of increasing money supply on the interest rate (r). Explain the sequence of events that lead to this change in the interest rate. How does the change in the interest rate affect output (Y)? Explain.

4.    Do question 40U at the bottom of page 343 of the textbook. (Show all work.)

5.   A country is producing a prescription drug at a price (PD) which is above the international (PW). Illustrate this with a market diagram and indicate what this country should do to satisfy its needs if trade id free. Under the pressure of domestic producers the government of this country imposes a tariff equal to half of the difference between PD and PW. Show the effect of this tariff on the amount of drugs imported to the country.

6.    Assume a fixed exchange rate (ERF) is set equal to the market price of the local currency (ER) where demand for and supply of the currency are equal. If the demand for local currency decreases, what kind of pressure is created in the market for this currency? If the central bank of this country wants to maintain the fixed exchange rate, what should it do? Explain and illustrate your answers on a market diagram.

Posted Date: 3/15/2013 1:31:58 AM | Location : United States







Related Discussions:- Fixed exchange rate supply and demand questions, Assignment Help, Ask Question on Fixed exchange rate supply and demand questions, Get Answer, Expert's Help, Fixed exchange rate supply and demand questions Discussions

Write discussion on Fixed exchange rate supply and demand questions
Your posts are moderated
Related Questions
Explain about the circular-flow of economic activities. Circular-Flow of Economic Activities: Economic Agents:    a. Households b. Firms Where they interact:

We will continue with the familiar demand curve homework the previous section Let the market demand for goods be with a linear curve:    (p =A q D /10), where it is known

For an interest rate of 12% per year compounded continuously, find (a) the nominal rate per year, (b) the nominal rate per quarter, (c) the effective rate per quarter, and (d) the

National Product and Domestic Product  A modern economy produces literally thousands of different goods and services. Some of these goods and services such as rice, wheat, shir

Summary of the Phillips curves In neo-classical synthesis, augmented Phillips curve is known as the short-run Phillips curve. It is presumed to be stable as long as expectation

"Consumption" is an old name for tuberculosis (TB) that explains how the illness wastes away or consumes its victims. TB is "an ancient enemy" that has plagued human kind for more

Which of the following is an important consideration in short run factor-proportions trade analysis? a. Comparative advantages only occur in theory. b. Specific factors are a

Climate and terrain in several South American countries are conducive to growing coffee efficiently. While other countries can grow coffee, they are not as efficient and effective

definition and charactoristics of index numbers.problems while constructing index numbers

how can we derive IS curve why has it negative slope