121 Course Schedule - 22F --Busir X D21, MindTap Assignment 10: Chapt x MindTap - Learning - C ng.cengage.com/staticb/ui/evo/index.html?deploymentld=59452325451249338856245831&elSBN=9780176887797&id=1607661390& CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 Drag the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. (? O Supply of Kroner Demand for Kroner Supply of Kroner O RINGGIT PRICE OF KRONER Demand for Kroner QUANTITY OF KRONER Suppose the real interest rates in Malaysia and Denmark are initially the same. Then the real interest rate in Denmark rises, while the real interest rate in Malaysia remains the same. This will cause the supply of kroner to and the demand for kroner to , which causes the Malaysian ringgit to relative to the Danish krone. Grade It Now Save & Continue Continue without saving MacBook Air SC 20 888 DIL F3 F4 F5 F6 F8 # % 2 3 4 5 6 8 Q W E R T Y U S D F G H J21 Course Schedule - 22F --Busin X D21 MindTap Assignment 10: Chapt X MindTap - Cengage Learning X + C A ng.cengage.com/staticb/ui/evo/index.html?deploymentid=59452325451249338856245831&elSBN=9780176887797&id=160 CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 EXCHAN Demand 1.0 Fixed exchange rates 0. 12 16 20 24 28 32 QUANTITY OF EUROS (Billions) On the previous graph, use the purple point (diamond symbol) to indicate the new equilibrium exchange rate and quantity under a system of flexible exchange rates Under a system of flexible exchange rates, the dollar will until the foreign exchange market reaches an equilibrium exchange rate of Now suppose that Canada wants to maintain the initial equilibrium exchange rate of $2 per euro. On the previous graph, use a grey point (star symbol) to indicate the new equilibrium under a system of fixed exchange rates. Under a system of fixed exchange rates, which of the following policies could the Canadian government use to prevent the change in demand for euros from driving the exchange rate to the new equilibrium? Check all that apply. Lower interest rates by way of monetary policy O Sell Canadian euro reserves in the foreign exchange market Place import restrictions on European goods Grade It Now Save & Continue Continue without saving MacBook Air esc 20 888 DII F2 F3 F4 F5 F6 F8 # 2 3 5 6 Q W E R T Y U A S D FMindTap Assignment 10: Chapt X MindTap - Cengage Learning x + C ng.cengage.com/staticb/ui/evo/index.html?deploymentld=59452325451249338856245831&elSBN=9780176887797&id=16076613 CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 Services balance +35 Goods and services balance +13 Net investment income from abroad Net unilateral transfers Current account balance Financial Accounts Change in Canadian-owned assets abroad -40 Change in foreign-owned assets in Canada +42 Financial account balance Statistical discrepancy - 5 Net balance 0 O Suppose an Argentine citizen gives money to his brother in Canada. This would be entered as a item under the section of the Canadian current account. According to the table, Canada is running a trade in goods and services. The current account balance suggests that Canadian current account transactions (exports and imports of goods and services and inflows and outflows of investment income and transfers) created outpayments of foreign currencies from Canada that were the inpayments of foreign currencies to Canada. Any surplus or deficit in one account must be offset by deficits or surpluses in other balance-of-payments accounts. Because the current account is in , the excess of foreign currency held by Canadians must either be loaned to foreigners or used to buy foreign stocks or bonds. All of these transactions are then recorded in the account. Since any imbalance in one account automatically leads to an equal, but opposite, imbalance in the other, the balance of payments is always Grade It Now Save & Continue Continue without saving MacBook Air PSC 20 F1 F3 F4 F5 F6 FB # * 2 3 4 5 6 7 Q W E R T Y U S D F G HDEL Course Schedule - 22F --Busir X D2L MindTap Assignment 10: Chap! X MindTap - Cengage Learning X + ng.cengage.com/staticb/ui/evo/index.html?deploymentld=59452325451249338856245831&elSBN=9780176887797&id=1607 CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 8. Equilibrium changes in the foreign exchange market The following questions focus on the exchange rate between the Malaysian ringgit and the Danish krone. Assume the exchange rate is flexible. The exchange rate is defined as the number of ringgit you must pay for one krone. Suppose a recession in Malaysia causes Malaysian incomes to decrease, while incomes in Denmark remain the same. Shift the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner if all other things remain equal. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. (? O Supply of Kroner Demand for Kroner Supply of Kroner RINGGIT PRICE OF KRONER Demand for Kroner QUANTITY OF KRONER esc 20 2 3 F4 F5 F6 C7 F8 @ W N 4 5 6 8D21 Course Schedule - 22F --Busin X D21. MindTap Assignment 10: Chapt x MindTap - Cengage Learning + ng.cengage.com/staticb/ui/evo/index.html?deploymentid=59452325451249338856245831&elSBN=9780176887797&id=1607661390&sr CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 The decrease in Malaysian incomes causes the Danish krone to relative to the Malaysian ringgit and causes the Malaysian ringgit to relative to the Danish krone. Suppose the price level in Denmark rises by 5%, while the price level in Malaysia remains the same. That is, the inflation rate in Denmark is higher than in Malaysia. Drag the appropriate curve or curves on the following graph to illustrate how this affects the market for Danish kroner. ? O Supply of Kroner Demand for Kroner O Supply of Kroner RINGGIT PRICE OF KRONER Demand for Kroner QUANTITY OF KRONER Suppose the real interest rates in Malaysia and Denmark are initially the same. Then the real interest rate in Denmark rises, while the real interest DII esc 20 888 F5 F6 F7 F8 F3 F4 # & 2 3 4 8 W E R Y Ung.cengage.com/staticb/ui/evo/index.html?deploymentld=59452325451249338856245831&elSBN=9780176887797 CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 7. Current, financial, and capital accounts Consider hypothetical balance-of-payments data for Canada presented in the following table. Complete the following table by selecting the correct value for each missing entry. Balance of Payments (Billions of dollars) Current Accounts Canadian merchandise exports +55 Canadian merchandise imports -77 Merchandise trade balance Canadian service exports +70 Canadian service imports Services balance +35 Goods and services balance +13 Net investment income from abroad -2 Net unilateral transfers L8 Current account balance Financial Accounts Change in Canadian-owned assets abroad -40 Change in foreign-owned assets in Canada +42 Financial account balance Statistical discrepancy -5 Net balance o Suppose an Argentine citizen gives money to his brother in Canada. This would be entered as a item under the MacBook esc 20 888 F1 F2 F3 F4 F5 F6 F7 # $ % & 2 3 4 5 6 Q W E R Y UX + 021 Course Schedule - 22F --Busir X D21 MindTap Assignment 10: Chapt X MindTap - Cengage Learning ng.cengage.com/staticb/ui/evo/index.html?deploymentld=59452325451249338856245831&elSBN=9780176887797&id= - C CENGAGE | MINDTAP MindTap Assignment 10: Chapters 14 & 15 Attempts Keep the Highest / 3 6. Balance of payments and the foreign exchange market The following graph shows the market for euros, which is initially in equilibrium. Suppose an economic expansion in Canada leads to an increase in the incomes of Canadian households, causing imports from Europe to rise. On the graph, illustrate the effect of an economic expansion on the market for euros by shifting the appropriate curve or curves. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. ? 4.0 O 3.5 Supply Demand 3.0 2.5 Supply EXCHANGE RATE (Dollars per euro) 2.0 Flexible exchange rates 1.5 1.0 Demand Fixed exchange rates 0.5 12 16 20 24 28 32 QUANTITY OF EUROS (Billions) MacBook Air esc 20 888 F2 F3 F4 F5 F6 F8 @ 2 3 4 5 6 2 Q W E R T Y U A S