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Suppose that a Toyota Camry costs $25,000 in the U.S. and €20,000 in Europe, while the nominal dollar-euro exchange rate is 0.9€/$.
a. Describe how an arbitrageur could profit from this situation (What would they buy? What would they sell?)
b. Based on the Law of One Price, what is the equilibrium nominal exchange rate between the U.S. dollar and the euro? What is the equilibrium real exchange rate between the U.S. and Europe?
c. Suppose the price of everything in the U.S. (including a Toyota Camry) increased by 5%. All else equal, how would that affect the equilibrium euro price of the U.S. dollar (i.e. - e*(€/$)) in the long run (up or down, and by how much)? Explain.
Explain how can you avoid the weakening dollar due to its depreciation as a result of inflation by weakening the economy by raising interest rates.
Suppose Panama produces only two goods, bananas and hats. If Panama has a comparative advantage in bananas, a move toward free trade will, a. harm hat workers, benefit banana workers, but benefit the nation as a whole. b. harm hat workers, harm bana..
For the protons labeled Ha and Hb in the structure below, predict the characteristics of their signals in the 1H NMR spectrum: the approximate chemical shift, the splitting pattern, and the integration value of their signals.
UBS does not respond to its competition explain how much of its sales is it going to lose.
Assume that software purchases by businesses are treated as expenses, as they were before November 1999. Calculate GDP using three different approaches: expenditure approach, income approach, and product approach.
Soft Selling occurs when a buyer is skeptical of the quality or usefulness of a product or service. For example suppose you're trying to sell a company a new accounting system that will reduce costs by 10%. Instead of asking for a price you offer ..
Suppose Congress (in an attempt to stimulate the economy in both the short and long run) passes an investment-tax credit, which subsidizes domestic investment. How will this policy affect (comparing the state of the economy prior to the enactment o..
Suppose you can invest in education that costs $10,000 each year for two years in a row. After that, you will receive additional income in the form of a higher salary of $15,000 for three years. If the interest rate is 4%, is this a good investm..
Your local bank is reluctant to lend to you as you basically have a large mortgage loan on the property on which the hospital complex lies.
Illustrate what sectors of the economy are likely to expand or recover in the near future. Illustrate what sectors may be the most vulnerable in the next year.
Using the static classical AD/YP model, demonstrate the effect of each of the following changes.
Paradox Dental, Limited., enjoys a local monopoly in provision of oral examination services in Tuskegee, Alabama. Total and marginal revenue relations for standard procedure are:
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