International Economics 10th Edition Robert Carbaugh - Solutions

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How can debt/equity swaps help banks reduce losses on developing-nation loans?
What methods do banks use to reduce their exposure to developing-nation debt?
What options are available to a nation experiencing debt-servicing difficulties? What limitations apply to each option?
Distinguish between debt-to-export ratio and debt service/export ratio.
What risks do bankers assume when making loans to foreign borrowers?
What is a eurocurrency? How did the eurocurrency market develop?
What caused the international debt problem of the developing nations in the 1980s? Why did this debt problem threaten the stability of the international banking system?
What facilities exist for trading nations that wish to borrow international reserves?
What are special drawing rights? Why were they created? How is their value determined?
What advantages does a gold exchange standard have over a pure gold standard?
What is the current role of gold in the international monetary system?
What is meant by a reserve currency? Historically, which currencies have assumed this role?
In terms of volume, which component of world reserves is currently most important? Which is currently least important?
The total supply of international reserves consists of two categories: (a) owned reserves and (b) borrowed reserves. What do these categories include?
What are the major factors that determine a nation's demand for international reserves?
A nation's need for international reserves is similar to an individual's desire to hold cash balances. Explain.
What are some obstacles to successful international economic-policy coordination?
Given a system of fixed exchange rates, for monetary policy, is unemployment-with-BOPsurplus a zone of policy agreement or policy conflict? What about inflation-with-BOPdeficit, unemployment-with-BOP-deficit, or inflation-with-BOP-surplus?
What is meant by the terms policy agreement and policy conflict?
With fixed exchange rates, when does an expansionary fiscal policy improve the nation's BOP? When does it worsen the BOP?
With fixed exchange rates, what impact does an expansionary monetary policy have on the nation's BOP? What about a contractionary monetary policy?
Under a system of floating exchange rates, is monetary policy or fiscal policy better suited for promoting internal balance? Why?
Under a system of fixed exchange rates, is monetary policy or fiscal policy better suited for promoting internal balance? Why?
Assume that a nation faces a BOP deficit with high unemployment. What exchange-rate adjustment can be made to resolve these problems? What if the nation experiences a BOP surplus with inflation?
What institutional constraints bear on the formation of economic policies?
What is meant by the terms expenditurechanging policy and expenditure-switching policy? Give some examples of each.
What are the most important instruments of international economic policy?
Distinguish among external balance, internal balance, and overall balance.
What is the purpose of a currency devaluation? What about a currency revaluation?
What techniques can a central bank use to stabilize the exchange value of its currency?
Present the case for and the case against a system of floating exchange rates.
What advantage does the SDR offer to small nations seeking to peg their exchange rates?
Why do small nations adopt currency baskets against which to peg their exchange rates?
What factors contribute to currency crises?
What is the purpose of capital controls?
Why do nations use a crawling-peg exchangerate system?
Discuss the philosophy and operation of the Bretton Woods system of adjustable pegged exchange rates.
Why do some developing countries adopt currency boards? Why do others dollarize their monetary systems?
How do managed floating exchange rates operate? Why were they adopted by the industrialized nations in 1973?
What factors underlie a nation's decision to adopt floating exchange rates or fixed exchange rates?
Xtra' For a tutorial of this question, go to http://carbaughxtra.swlearning.com Assume the United States exports 1,000 computers at a price of $3,000 each and imports 150 British autos at a price of £10,000 each.Assume that the dollar/pound exchange rate is 2 dollars per pound.a. Calculate, in
Suppose ABC Inc., a U.S. auto manufacturer, obtains some of its auto components in Mexico and that the costs of these components are denominated in pesos; the costs of the remaining components are denominated in dollars. Assume the dollar's exchange value appreciates by 50 percent against the
Suppose ABC Inc., a U.S. auto manufacturer, obtains all of its auto components in the United States and that its costs are denominated in dollars. Assume the dollar's exchange value appreciates by 50 percent against the Mexican peso. What impact does the dollar appreciation have on the firm's
How can currency depreciation-induced changes in household money balances promote payments equilibrium?
According to the absorption approach, does it make any difference whether a nation's currency depreciates when the economy is operating at less than full capacity versus at full capacity?
What implications does currency passthrough have for a nation whose currency depreciates?
How does the J-curve effect relate to the time path of currency depreciation?
What is meant by the Marshall-Lerner condition? Do recent empirical studies suggest that world elasticity conditions are sufficiently high to permit successful depreciations?
Three major approaches to analyzing the economic impact of currency depreciation are (a) the elasticities approach, (b) the absorption approach, and (c) the monetary approach. Distinguish among the three.
How does a currency depreciation affect a nation's balance of trade?
What implications does the monetary approach have for domestic economic policies?
According to the monetary approach, balance in a nation's payments position is restored when the excess supply of money or the excess demand for money has fallen to restore the equilibrium condition: Money supply equals money demand. Explain.
What are some major disadvantages of the automatic adjustment mechanism under a system of fixed exchange rates?
When analyzing the income-adjustment mechanism, one must account for the foreign repercussion effect. Explain.
Keynesian theory suggests that under a system of fixed exchange rates, the influence of income changes in surplus and deficit nations helps promote balance-of-payments equilibrium. Explain.
Inthe gold-standard era, there existed the socalled rules of the game. What were these rules? Were they followed in practice?
How can adjustments in domestic interest rates help promote payments balance?
What is meant by the quantity theory of money? How did it relate to the classical price-adjustment mechanism?
Under a fixed exchange-rate system, what automatic adjustments promote payments equilibrium?
What is meant by the term balance-of-payments adjustment? Why does a deficit nation have an incentive to undergo adjustment?What about a surplus nation?
Suppose that the nominal interest rate on 3-month Treasury bills is 8 percent in the United States and 6 percent in the United Kingdom, and the rate of inflation is 10 percent in the United States and 4 percent in the United Kingdom.a. What is the real interest rate in each nation?b. In which
The appreciation in the dollar's exchange value from 1980 to 1985 made U.S. products(less/more) expensive and foreign products(less/more) expensive, (decreased, increased)U.S. imports, and (decreased, increased) U.S.¥exports.Suppose the dollar/franc exchange rate equals $0.50 per franc. According
Explain why you agree or disagree with each of the following statements:a. "A nation's currency will depreciate if its inflation rate is less than that of its trading partners."b. "A nation whose interest rate falls more rapidly than that of other nations can expect the exchange value of its
Xtra! For a tutorial of this questi~n, goto....."'@.. http://carbaughxtra.swlearnmg.com Assuming market-determined exchange rates, use supply and demand schedules for pounds to analyze the effect on the exchange rate (dollars per pound) between the u.s. dollar and the British pound under each of
What methods do currency forecasters use to predict future changes in exchange rates?
What is meant by exchange-rate overshooting? Why does it occur?
Explain how the following factors affectthe dollar's exchange rate under a system of marketdetermined exchange rates: (a) a rise in the U.s. price level, with the foreign price level held constant; (b) tariffs and quotas placed on u.s. imports; (c) increased demand for u.s.exports and decreased
What factors underlie changes in a currency's value in the short run?
Identify the factors that account for changes in a currency's value over the long run.
If a currency becomesovervalued in the foreignexchange market, what will be the likelyimpact on the home country's trade balance? What if the home currency becomes undervalued?
What predictions does the purchasing-powerparity theory make concerning the impact of domestic inflation on the home country's exchange rate? What are some limitations of the purchasing-power-parity theory?
Why are international investors especially concerned about the real interest rate as opposed to the nominal rate?
In a free market, what factors underlie currency exchange values? Which factors best apply to long-run exchange rates and to short-run exchange rates?
You are given the following spot exchange rates: $1 = 3 francs, $1 = 4 schillings, and 1 franc = 2 schillings. Ignoring transaction costs, how much profit could a person make via three-point arbitrage?
Assume a speculator anticipates that the spot rate of the franc in three months will be lower than today's 3-month forward rate of the franc, $0.50 = 1 franc.
Table 11.12 gives hypothetical dollar/franc exchange values for Wednesday, May 5, 2003.a. Fill in the last two columns of the table with the reciprocal price of the dollar in terms of the franc.b. On Wednesday, the spot price of the two currencies was dollars per franc, or __francs per dollar.c.
Suppose the interest rate (on an annual basis)on 3-month Treasury bills is 10 percent in London and 6 percent in New York, and the spot rate of the pound is $2.a. How can a U.S. investor profit from uncovered interest arbitrage?b. If the price of the 3-month forward pound is$1.99, will a U.S.
Suppose the spot rate of the pound today is$1.70 and the 3-month forward rate is $1.75.a. How can a U.S. importer who has to pay 20,000 pounds in 3 months hedge her foreign-exchange risk?b. What occurs if the U.S. importer does not hedge and the spot rate of the pound in 3 months is $1.80?
Xtra: For a tutorial of this question, go to http://carbaughxtra.swlearning.com Table 11.11 shows supply and demand schedules for the British pound. Assume that exchange rates are flexible.a. The equilibrium exchange rate equals __. At this exchange rate, how many pounds will be purchased, and at
Suppose $1.69 = £1 in New York and $1.71 =£1 in London. How can foreign-exchange arbitragers profit from these exchange rates?Explain how foreign-exchange arbitrage results in the same dollar/pound exchange rate in New York and London.
If the exchange rate changes from $1.70 = £1 to $1.68 = £1, what does this mean for the dollar? For the pound? What if the exchange rate changes from $1.70 =£1 to $1.72 =£1?
Distinguish between stabilizing speculation and destabilizing speculation.
What is the strategy of speculating in the forward market? In what other ways can one speculate on exchange-rate changes?
What explains the relationship between the spot rate and the forward rate?
Who are the participants in the forwardexchange market? What advantages does this market afford these participants?
Explain why exchange-rate quotations stated in different financial centers tend to be consistent with one another.
The supply and demand for foreign exchange are considered to be derived schedules.Explain.
What is meant by the forward market? How does this differ from the spot market?
What is meant by the foreign-exchange market? Where is it located?
Xtra! Fora tutorial of this questi~n, go to'''''''!IIdi. http://carbaughxtra.swlearnlng.com Table 9.9 illustrates the hypothetical demand and supply schedules of labor in the United States. Assume that labor and capital are the only two factors of production. On graph paper, plot these schedules.a.
Xtra! For a tutorial ofthis question, go to~O http://carbaughxtra.swlearning.com Table 9.8 illustrates the revenue conditions facing ABC, Inc., and XYZ, Inc., which operate as competitors in the U.S.calculator market. Each firm realizes constant long-run costs (MC =AC) of $4 per unit. On graph
What effects does labor migration have on the country of immigration? The country of emigration? The world as a whole?
What are some examples of welfare gains and welfare losses that can result from the formation of international joint ventures among competing businesses?
Is the theory of multinational enterprise essentially consistent or inconsistent with the traditional model of comparative advantage?
What are the major issues involving multinational enterprises as a source of conflict for source and host countries?
Under what conditions would a business wish to enter foreign markets by extending licenses or franchises to local businesses to produce its goods?
What is meant by the term multinational enterprise?
What are the most important motives behind an enterprise's decision to undertake foreign direct investment?
Why is it that the rate of return on u.s. direct investments in the developing nations often exceeds the rate of return on its investments in industrial nations?
What are the major foreign industries in which U.S. businesses have chosen to place direct investments? What are the major industries in the United States in which foreigners place direct investments?

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International Economics 10th Edition Robert Carbaugh - Solutions

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