Two countries, Country N in North America and Country S in South America, have the same...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Two countries, Country N in North America and Country S in South America, have the same CPI basket. Year 2000 is the CPI base year for both countries. In that year, the cost of CPI basket in Country N is SN100, and in country S is $$1000, where SN and Ss are their respective currencies. Twenty years later, in 2020, the CPI in Country N rose to 240, and in Country S to 360. a) In the ideal world in which the purchasing power parity (PPP) holds true, what should be the nominal exchange between $s and SN in Year 2000 and in Year 2020. Show calculations and explain the change in nominal exchange rate. (5 marks) b) Suppose in reality, the nominal exchange rage between the two currencies is 18 $s per SN in Year 2020. First, explain why the nominal exchange rate differs from your calculation above. Second, calculate the real exchange rate between the two countries, and explain the meaning of your calculated result. (6 marks) c) During Year 2021, the growth of the real GDP in the two countries are, 0% in country N and -5% in country S; and the growth of money supply in the two countries are, 10% in country N and 15% in country S. Give your best estimate of the nominal exchange rate between their currencies by the end of Year 2021. Show calculations. (7 marks) d) About Country N only in Year 2021, at the beginning of the year, the country had total investment in foreign assets of $N240 billions, and foreign countries had total investment in Country N's assets of SN360 billion. By end of Year 2021, these two numbers changed to $N260 and SN410 respectively. Calculate Country N's net capital outflow(NCO) and net export (NX) for Year 2021. Two countries, Country N in North America and Country S in South America, have the same CPI basket. Year 2000 is the CPI base year for both countries. In that year, the cost of CPI basket in Country N is SN100, and in country S is $$1000, where SN and Ss are their respective currencies. Twenty years later, in 2020, the CPI in Country N rose to 240, and in Country S to 360. a) In the ideal world in which the purchasing power parity (PPP) holds true, what should be the nominal exchange between $s and SN in Year 2000 and in Year 2020. Show calculations and explain the change in nominal exchange rate. (5 marks) b) Suppose in reality, the nominal exchange rage between the two currencies is 18 $s per SN in Year 2020. First, explain why the nominal exchange rate differs from your calculation above. Second, calculate the real exchange rate between the two countries, and explain the meaning of your calculated result. (6 marks) c) During Year 2021, the growth of the real GDP in the two countries are, 0% in country N and -5% in country S; and the growth of money supply in the two countries are, 10% in country N and 15% in country S. Give your best estimate of the nominal exchange rate between their currencies by the end of Year 2021. Show calculations. (7 marks) d) About Country N only in Year 2021, at the beginning of the year, the country had total investment in foreign assets of $N240 billions, and foreign countries had total investment in Country N's assets of SN360 billion. By end of Year 2021, these two numbers changed to $N260 and SN410 respectively. Calculate Country N's net capital outflow(NCO) and net export (NX) for Year 2021.
Expert Answer:
Answer rating: 100% (QA)
a In the ideal world in which the purchasing power parity PPP holds true the nominal exchange rate between the two currencies in Year 2000 and in Year ... View the full answer
Related Book For
Business Ethics Ethical Decision Making & Cases
ISBN: 978-1439042236
8th Edition
Authors: O. C. Ferrell, John Fraedrich, Linda Ferrell
Posted Date:
Students also viewed these chemistry questions
-
You have a 81.4% efficient pulley system arranged such that the effort pulls upward. Suppose that this system requires 139 N of effort pulling for 14.6 m, in order to lift the load up by 3.65 m....
-
(a) How many photons are emitted per second by a He-Ne laser that emits 2.2 mW of power at a wavelength ( = 632.8 nm? (b) What is the frequency of the electromagnetic waves emitted by a He-Ne laser?
-
What three elements are contained in a balance sheet?
-
Clark had brain surgery. Insurance will not pay for the surgery until the deductible of $1,000 is hit. Then Clark's coinsurance of 80% / 20% kicks in. Clark has an out-of-pocket maximum of $7,500....
-
The following table provides the information necessary to construct a project network and project crash data: a. Construct the project network. b. Determine the maximum possible crash time for the...
-
Sparrow Company uses the retail inventory method to estimate ending inventory and cost of goods sold. Data for 2021 are as follows: The company records sales net of employee discounts. Employee...
-
Haupt Consulting, Inc., began operations and completed the following transactions during the first half of December: Requirements 1. Analyze the effects of Haupt Consultings transactions on the...
-
(Single-step Income, Retained Earnings, Periodic Inventory) Presented below is the trial balance of Mary J. Blige Corporation at December 31, 2004. A physical count of inventory on December 31...
-
1. 5 points | Statistics of sample mean Suppose a simple random sample of size n=100 from a distribution with mean 20, variance 16. What is the sample mean's variance and standard deviation?
-
Palese bought five lottery tickets. He used a play slip to select his numbers, then filled them in on the grid. He put his tickets in his pocket. At home, he did the laundry. Several days later, he...
-
= 0 (ax + ax + a3x3 + a4x4 lasx + a6x2 + a7x3 + agx4 = 0' Use Gaussian elimination method to solve the system a1, az, a3, a4, a5, a6, a7, and ag are the last eight digits of your ID. (Example: if...
-
Why is the long-run market supply curve horizontal in a constant-cost industry?
-
Why is marginal revenue below average revenue for a monopolist?
-
What mechanism might be developed to determine whether it is appropriate for government to give a nudge?
-
Behavioral economics acknowledges that cultural norms impact peoples behavior, something that feminist economists have long included in their analysis. What risks does nudge policy pose for using...
-
Does a monopolist take market price as given? Why or why not?
-
k ces CA Qu. 62 What is true about packet sniffers? What is true about packet sniffers? Check All That Apply Legitimate sniffers are used for routine examination and problem detection. Unauthorized...
-
Use the graphs of f and g to graph h(x) = (f + g) (x). To print an enlarged copy of the graph, go to MathGraphs.com. 1. 2. y 24 8. 2. -2 -2 4 6
-
On the basis of Home Depot's response to environmentalist issues, describe the attributes (power, legitimacy, urgency) of this stakeholder. Assess the company's strategy and performance with...
-
Some segments of society vigorously contend that companies that sell alcoholic beverages and tobacco products cannot be socially responsible organizations because of the nature of their primary...
-
Do you think Wal-Mart is doing enough to become more sustainable? Wal-Mart Stores, Inc., is an icon of American business. From small-town business to multinational, from hugely controversial to a...
-
Derive Equation 2.30, \[ x(t)=B_{1} \cos \omega_{n} t+B_{2} \sin \omega_{n} t \] beginning with the equation of motion.
-
For a body suspended between two springs as in Figure 2.60, show that the period of oscillation is \[ T=2 \pi \sqrt{\frac{W}{g\left(k_{1}+k_{2} ight)}} \] ellel k W ellel k Figure 2.60: Body...
-
A compound pendulum in the shape of a rectangle is supported at point \(O\) and allowed to oscillate. The dimensions of the rectangle are given in Figure 2.61. Calculate the natural frequency for...
Study smarter with the SolutionInn App