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Exchange Rates

Identify and describe the effect of changing the savings rate on consumption.

Dear OTA: Please try to do the following for me. There is an attachment to this that has the info needed to answer these questions. I sincerely appreciate your help as I cannot calculate this information out. :-( ? Identify and describe the effect of changing the savings rate on consumption. ? Calculate the marginal prop

Exchange Rates & Balance

A) Following the decrease in the demand for the Baht, has the Baht appreciated or depreciated in relation to the US dollar? B) Suppose that the Bank of Thailand desires to push the equilibrium exchange rate back to a value of $.27 per Baht. How could the Bank of Thailand accomplish this objective by inducing the demand for Ba

Floating exchange rate: effect of US inflation, major discoveries of the highest quality diamonds ever found occur in Russia & Central Asia, causing a significant decline in purchases of South African diamonds on Rand; decrease in the demand for the baht

Explain how the following events would effect the market for South Africa's currency, the rand, assuming a floating exchange rate. a) a rise in the US inflation causes many US residents to seek to buy gold, which is a major South African export, as hedge is against inflation. The rand appreciates The rand does not

A quota is

I am stuck on the following multiple choice questions. Could someone please help? Thanks so much:) 11. A quota is a. a tariff on exports b. a quantitative limit on the amount of a good that may be imported c. the same as a non-prohibitive tariff d. the amount of exports a country needs to finance its imports e. a per-un

IS and LM curves

Given the following parameters for an open economy open economy where C=10+.8(y-T); I=10 G=10 T=10 and imports and exports are given by IM=.3Y and X=.3Y* respectively where Y is foreign output. Provide an equation that resolves to the lowest level. Given Y*. What is the mulipier effect of this open economy? Explain the be

Suppose the dollar-pound rate equals $0.5 per pound.

Suppose the dollar-pound rate equals $0.5 per pound. According the purchasing power parity theory, what will happen to the dollar's exchange rate under each of the following scenarios ? a) The U.S. price level increases by 10% and price level in Britain stays constant b) The U.S. price level increases by 10%, while price le

Economics in a Global Environment - Federal Reserve

Please Use Original Work 1-2 pages Details: Describe three ways in which the Federal Reserve can change the money supply. If the Federal Reserve is going to adjust all of these tools during an economy that is growing too quickly, what changes would they make? If the Federal Reserve is going to adjust all of these t

Economics Problems - Multiple Choice

33. In the rate process, the determination of the __________________ has historically been somewhat neglected in relation to the other steps in the process. a. Rate structure. b. Rate level. c. Allowable operating costs. d. Rate base. e. Allowable rate of return. 43. An illustration of a non-credible commitment is the

Economic Review Questions

Please help provide the correct term for the following statements. Only the term is needed. 1. The price at which an investor will sell a security. The price a buyer is willing to pay for a security is the bid. The difference between the ask and bid price is the spread. 2. A market in which prices are in an upw

Multiple choice economics questions

Aggregate demand slopes downward because a. there are always substitute goods for anything. b. of diminishing marginal utility. c. of the effect of higher prices on consumers' wealth. d. foreign goods can substitute for domestic goods.


Suppose the spot exchange rate is $2.00 per euro and that the annual interest rate on one-year government bond is 10 percent in the U.S. and 8 percent in Germany. a. If you expect the spot price of the euro to be $2.00 in one year, where will you invest? Explain b. In order for investors to be

Exchange Rates

A) What is the current exchange rate for changing dollars into 1,000 units of pounds, Canadian dollars, euros, yen, Mexican pesos, and Swedish kronas? See attached file for full problem description.

Economic Indexing

The Big Mac Price Index computed by the Economist has consistently found the U.S. dollar to be undervalued against some other major currencies, which seems to call for a rejection of the purchasing power parity theory. Explain why the index may not be a valid test of the theory.

Economics for Decision-Making

The marketing department has discovered that the price elasticity for your company's products in Brazil is expected to be much greater than in current markets served. Separately, your CFO sent you an e-mail earlier in the week stating that depending on how much business your company does abroad, the firm would expose 5 to 20 per

Multinational Finance Problems

1) One year ago, a U.S. investor converted dollars to yen and purchased 100 shares of stock in a Japanese company at a price of 3,150 yen per share. The stocks total purchase cost was 315,000 yen. At the time of purchase, in the currency market 1 yen equaled $0.00952. Today, the stock is selling at a price of 3,465 yen per sha

Interest Rates/ Axes/ Slopes

Suppose you hear a commentator on the radio state that when interest rates fall, the stock market [the Dow Jones average say] tends to rise. {NOTE -- the question DOES NOT ask you to justify the statement, only to describe the graph.} Draw a graph of such a relationship for yourself. a) What are the axes? b) Describe the s

How to calculate what to invest in

Suppose the CFO of a German corporation with surplus cash flow has 1million Euros to invest. Suppose that interest rates on 1-year CD deposits in US banks are 2%, while rates on 1 year CD deposits denominated in euros in German banks are currently 4.5%. Suppose further that the CFO expects that the (euro/$) exchange rate will in

Currency Swaps and Interest Rate Derivatives

1. At present, LIBOR3 is 7.93% and LIBOR6 is 8.11%. What is the forward rate for a LIBOR3 deposit to be placed in three months? 2. Company A, a low-rated firm, desires a fixed-rate, long-term loan. A currently has access to floating interest rate funds at a margin of 1.5% over LIBOR. Its direct borrowing cost is 13% in the

Exchange Rate Regime and Monetary policy

Explain how does the choice of an exchange rate regime alter the conduct of monetary policy. In addition, please also explain when it tend to increase the power of the monetary authorities and when to decrease their power.

Money and Banking: Required Reserve Ration

Dubya decides to deposit $5,000 of his cash holdings in Wachovia. The required reserve ratio is set at 10 percent or .10 and the bank does not hold any excess reserves. a. What is the immediate effect on his deposit on the banking system? Explain. b. What is the maximum amount of money that Wachovia could loan out? Expl

Economics Problem Set

1. Dubya decides to deposit $5,000 of his cash holdings in Wachovia. The required reserve ratio is set at 10 percent or .10 and the bank does not hold any excess reserves. a. What is the immediate effect on his deposit on the banking system? Explain. b. What is the maximum amount of money that Wachovia could loan out?

Macroeconomics Questions

1) Over the last two decades, according to the United States balance of payment, A)the current accounts and the capital account balance tend to move in the same direction.(B) the current account and the capital accounts balance tends to move in opposite direction.(C)there is no clear relationship between the current accounts ba

Economics - Bank of Canada decides to expand the money supply.

Suppose that the Bank of Canada decides to expand the money supply. * Why would it be counterproductive for the Bank of Canada to fix the value of the exchange rate? * What is the effect of this policy on the interest rate in the long run? How do you know? * What characteristic of the economy makes the short-run effect monet

Exchange Rate & Trade Deficit

Assume that foreigners are selling their investment holdings in Country A's financial markets (net capital outflow) and that Country A's trade deficit is widening. Assuming no other forces are affecting exchange rates, answer the following questions: 20. What happens to Country A's exchange rate and why? 21. Does the change

Maximizing profit given different market conditions.

(See attached file for full problem description) --- Problem 7: In your job overseeing pricing and marketing of software for a major U.S. manufacturer of software (Macrotuff), your staff develops the following data on the willingness to pay for two of your products (Doors and Traveler) for three groups of potential cust

Forward exchange rate, Discount/premium, Depreciation/ Appreciation

1. Smith is a currency trader and is reviewing forward foreign exchange rates. His investors have made several statements regarding foreign exchange rates. Which of the following statements is correct and can help Smith predict future spot exchange rates? According to the foreign exchange expectation relation forward: A) di

Purchasing power parity, Interest rate parity

1. Smith knows that if the forward rate is lower than what interest rate parity indicates, the appropriate strategy would be to borrow: A) pounds, convert to dollars at the spot rate, and lend the dollars. B) pounds, convert to dollars at the forward rate, and lend the dollars. C) dollars, convert to pounds at the

Forward premium/discount, Exchange rate movements, Parity

1) Doug Wyatt is a currency trader for Global Currency Exchange Inc. Wyatt has compiled the following information concerning the U.S. dollar ($) / Australian dollar (AUD) exchange rate. - Spot bid rate: $0.745 - Spot ask rate: $0.749 - 3-month forward bid rate: $0.752 - 3-month forward ask rate: $0.754 Which of the f

NPV Comparison between 2 Projects

The following cash flows are estimated for 2 mutually exclusive projects: (See attached chart). When is Project B more lucrative than Project A? (that is, over what range of costs of capital (k) does Project B have a higher NPV than Project A?) (Choose the best answer). (Hint: calculate the crossover rate - the cost of