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Real and nominal exchange rates and inflation
Using the definition of the real exchange rate (and Propositions 7 and 8 in Appendix 2 at the end of the book), you can show that
In words, the percentage real appreciation equals the percentage nominal appreciation plus the difference between domestic and foreign inflation.
a. If domestic inflation is higher than foreign inflation, but the domestic country has a fixed exchange rate, what happens to the real exchange rate over time? Assume that the Marshall-Lerner condition holds. What happens to the trade balance over time? Explain in words.
b. Suppose the real exchange rate is constant-say, at the level required for net exports (or the current account) to equal zero. In this case, if domestic inflation is higher than foreign inflation, what must happen over time to maintain a trade balance of zero?
Suppose the price of Labor is $50 a day and the price of capital is $100 per day. Draw the iso-cost curve if the firm chooses to spend $10,000 a day. Add an isoquant tangent to the iso-cost at 120 units of labor.
A store has 5 years remaining on its lease in a mall. Rent is $2,000 per month, 60 payments remain, and the next payment is due in 1 month. The mall's owner plans to sell the property in a year and wants rent at that time to be high.
of this sales revenue he must pay the manufacturer a wholesale cost of $620,000 he also pays wages and utiilty bills totaling $210,000 if he doe not operate this piano business he can work in an accounting firm and recieve an annual salery of $45,..
M-commerce also known as mobile commerce is being lumped in with several strategic internet plans. Explain some of the industries that are likely to use mobile commerce and how it is working for them.
For both sets of calculations, compare the firm's output price and the calculated average variable cost and average total cost. Should the firm shutdown immediately when the total fixed cost equals $1,000,000
Whenever the price of any of the goods increase, Richard gives a call to his rich uncle who immediately transfers funds to him so that Richard's utility remains constant. Assume the price of burritos increased by 20%, and even after Richard is com..
Explain which country has a comparative advantage in the production of hats and which country has a comparative advantage in the production of beer.
Describe the ways in which the government provides a safety net for banks. How has that safety net evolved over time?What four main factors determine whether a bank merger or acquisition will be allowed?
Suppose that in the domestic market for computer chips the demand is Pd = 110 Qd . The domestic supply is Ps = 10 + Qs . Foreign suppliers would be willing to supply any number of chips at a price of 30$.
Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y - T). Planned investment is 300, as are government spending and taxes. a. If Y is 1,500, what is planned spending
Austin Utilities is planning to install solar panels to provide some of the electricity for its groundwater desalting plant. The project would be done in two phases. The first phase will cost $4 million in year 1 and $5million in year 2.
What could be responsible for this pattern
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