Assume that American rice sells for 100 dollars per bushel,…
Assume that American rice sells for 100 dollars per bushel, Japanese rice sells for 16,000 yen per bushel, and Vietnamese rice sells for 18,000 dong per bushel. The nominal exchange rates are 160 yen per dollar and 200 dong per dollar. CountryPriceExchange rate US$100 Japan¥16,000¥160 Vietnam₫18,000₫200 (a) How could you make a profit from this situation? What would be your profit per bushel of rice in dollars? (2 marks)(b) What nominal exchange rate would eliminate arbitrage (advantage of price difference)? (2 marks)(c) Why are net exports and net capital outflow always equal? (2 marks)(d) Suppose that the reserve requirement for checking deposits is 10 per cent and that banks do not hold any excess reserves. If the central bank sells $1 million of government bonds, what is the effect on the economy’s reserves and money supply? (2 marks) Now suppose the central bank lowers the reserve requirement to 5 per cent, but banks choose to hold another 5 per cent of deposits as excess reserves. (e) Why might banks do so? (1 mark)(f) What is the overall change in the money multiplier and the money supply as a result of these actions? (2 marks)(g) Under what circumstances does purchasing-power parity explain how exchange rates are determined, and why is it not completely accurate? (1 mark)
Read DetailsCompute how much each of the following is worth in terms of…
Compute how much each of the following is worth in terms of today’s dollars using 258 as the price index for today. (a) In 1958 the CPI was 30.0 and the price of a movie ticket was $1.50. (2 marks)(b) In 1950 the CPI was 6.0 and a cook earned $0.25 an hour. (2 marks)(c) In 1942 the CPI was 3.0 and a gallon of gas cost $0.10. (2 marks)
Read DetailsCompare the three approaches to classification covered in de…
Compare the three approaches to classification covered in decision theory: (1) discriminant function, (2) probabilistic discriminative model, and (3) probabilistic generative model. For each, state what it models and give one advantage or limitation.
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