So, I'm really lazy this week about doing homework because some friends from my hometown were finally able to come to NYC after living here for two years. Would anyone want to help me out with my homework? They are all short answer questions, like one or two sentence answers. I have LOTS of Silver Bananas to give out for help!
Here are the questions!
1 What is the significance of the real exchange rate for assessing incentives in a country for investment in the traded goods sector.?
2. Suppose that the 3-month Euro Area interest rate is 1.46% while the US 3-month money market rate is 1.93%. Suppose that the current Euro cost of one US dollar is 0.77. What would you predict, with covered interest parity, to be the three month forward rate for the Euro/Dollar exchange rate?
3. What happens to the foreign exchange reserves of a country when a central bank expands the money supply under fixed exchange rates?
4. How is an exchange rate devaluation a form of protection to domestic manufacturers competing with imported goods?
5. Argentina has a merchandise trade balance of US$17.2 billion and a current account balance of US$8.5 billion. What does this information imply about the net foreign asset position of Argentina?
6. How can deviations from covered interest parity provide useful information for market practitioners?
7. How can fiscal expansion in one country lead to the collapse of a fixed exchange rate agreement among member countries?
8 If a market basket of sushi is US$10 in New York and Yen 750 in Tokyo, what, by purchasing power party, is the equilibrium exchange rate of the Yen for one US dollar? If the Yen/Dollar exchange rate is at 80, is the dollar (not Yen) over or undervalued by this index?
9 What are advantages of having a central bank, or not having a central bank or being a fixed exchange rate system?
