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1. Assume you are an American importer who imports christmas toys from China and has to pay 250,000 chinese Yuans at the end of 60 days. If you don't hedge this transaction in the forward market, you face a loss if the Chinese Yuan:
A. is fixed in value
B. Depreciates against the dollar
C. Appreciate again the dolar
D. either appreciates or depreciates against the dollar
2. Assume that the United States faces an 3 percent inflation rate while no (zero) inflation exists in Japan. According to the purchasing-power parity theory, the dollar would be expected to:
a. Appreciate by 3 percent against the yen
b. Depreciate by 3 percent against the yen
c. Remain at its existing exchange rate
d. None of the above
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Assume Fed expands money supply, however because public expect this Fed action, it simultaneously raises its expectation of cost level. Illustrate what will happen to output and cost level in short run.
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Before output has had time to adjust, by how much is disposable income reduced. Compute the resulting change in consumption expenditure.
What should happen to the equilibrium price, interest rate and quantity of bonds if the economy starts to improve after the events in question 7? Use the simple single bond market we developed in class to answer this question. It should be obvious th..
Which of the following terms express a person who risks his or her financial resources by investing it in the hope of making a profit.
Consider an economy where, consumer’s utility function is given as U(C,L)=C-(1/2)L2 . where C is consumption and L is labor. The production technology is Y=(1.6)L-(1/2)L2 . The turnover cost per labor is (0.36)/(w/p). What happens to t as real wage i..
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