We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Macroeconomics problems - Essay Example

Comments (0) Cite this document
Summary
Name Professor Course Date Macroeconomics SECTION ONE: a) Wanda, in America, wants to buy a bottle of French wine. The wine costs 1000 euro’s. Pierre, a Frenchman, wants to buy an American computer that costs $2000. The exchange rate is ‘1 euro=$1.08’…
Download full paper
GRAB THE BEST PAPER
Macroeconomics problems
Read TextPreview

Extract of sample
Macroeconomics problems

Download file to see previous pages... b) Assume the exchange rate changes. Now, ‘1 euro=$1.20’. Showing all work, what does Wanda pay for the wine? What does Pierre pay for the computer? In this case, there is a change in the individual rates of exchange between the euro and the dollar. Currently, ‘1 euro=$1.20’ hence Wanda will spend (1000*1.20) 1200 dollars on a bottle of French wine. On the other hand, Pierre will spend (2000/1.20) 1,666.67 Euros on the purchase of an American computer. c) Which currency appreciated? Explain. Taking a closer look at the two currencies, it is evident that the Euro appreciated against the dollar. According to macroeconomic theory, appreciation of a currency refers to the increase in the value of one international currency against the other in the sense that the appreciating currency is able to purchase more of the other currency (Krugman & Wells 100). In the above mentioned case, the dollar and the Euro are international currency that had an initial exchange rate of ‘1 euro=$1.08.’ However, there was a change in the exchange rates and the current rate stands at ‘1 euro=1.20.’ This means that the dollar has to fetch more additional units to purchase a single unit of a Euro. This is evident in the case of an American purchasing a bottle of wine and has to pay an initial price of 1080 dollars. Since the euro has appreciated, the American will have to pay a higher price of 1200 for the same bottle of French wine. Consumers using the Euro have a higher purchasing power compared to those using the dollar. SECTION TWO: a) In this section, you will set up a balance of payments table. Please read chapter 26. A BOP has three accounts. You will need to place each item in its proper account and have a dollar value for the total of each account. The table will be in billions. Please indicate, plus or minus, for each number. Credits ‘000,000 ($) Debits ‘000,000 ($) A. Current Account (1) Exports (2) Imports (3) Net Transfers (4) Net Interest Income Balance B. Capital Account (5) Foreign Investments in the U.S. (6) U.S. Investments Abroad Balance (7) Statistical Discrepancies Overall Balance C. Official Reserve Account +2,421 +150 +220 +1150 +250 +30 -2,971 -180 -900 -40 -30 b) What does the official settlements number indicate? Be precise in explaining this. Based on the above table, the official settlements number is -30 and this indicates that the US has an increase in its foreign reserves and that there is also a decrease in the dollar reserves held by foreign central banks (Krugman & Wells 113). The decrease in dollar reserves among foreign central banks count as debits in the Balance Of Payments account. SECTION THREE: a) Under what conditions would the Fed sell government securities? The Fed would sell government securities under conditions such as inflation, employment and national output. Under such cases, the Fed does not have control but can only influence such conditions to its favor. The Fed can create an effect on such conditions by increasing or reducing the short term rate interest especially through open market operations. Some of the government securities used during open market operations includes treasury bills, bonds and notes (Krugman & Wells 119). The control of money supply offers tangible solutions to the conditions mentioned above. When the Fed is targeting to increase the supply of money in the economy, there will be the purchase of securities. On the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Macroeconomics problems Essay Example | Topics and Well Written Essays - 2000 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1397485-macroeconomics
(Macroeconomics Problems Essay Example | Topics and Well Written Essays - 2000 Words)
https://studentshare.org/macro-microeconomics/1397485-macroeconomics.
“Macroeconomics Problems Essay Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/macro-microeconomics/1397485-macroeconomics.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Macroeconomics
Following is the evaluation of the article. 1. Principles of Economics & US Tax Cuts The article has beautifully covered the different economic indicators along with their projected movements on the basis of the proposed strategy by the current Govt. The author has identified, as well as, analyzed the impact of tax cuts by taking into consideration of the different economic theories.
10 Pages(2500 words)Essay
Macroeconomics
Probably the most important are the following: technological development, development of transport infrastructure, growth of the role of international companies, etc. In any case, these reasons have led to creation of a global world. Global economy is one of the most essential areas of this world.
10 Pages(2500 words)Essay
INTERMEDIATE MACROECONOMICS
The author further discusses the problems related to the effectiveness of the expansionary policy that include inconsistency problem, liquidity trap, crowding out and the Ricardian Equivalence. After the expansionary policies, the author discusses the restrictive policies that are used to fight inflation.
2 Pages(500 words)Essay
Concepts and Problems in Macroeconomics
GDP, while affecting employment in the long term, had little effect in the short term on consumer confidence. In an industrialized consumer economy, perception is almost as important as reality. Consumer spending is driven by consumer confidence. Gross domestic product, a measure of the economy, may have no relationship to consumer's perception of the economy.
4 Pages(1000 words)Essay
Macroeconomics Essay
b. The expansion during 2002 and 2003 is called jobless recovery because it "leaves the Okun gap constant and creates enough new jobs to match the growing population but not enough to lower the unemployment rate." c. I believe that the jobless recovery is most probably brought about by the weak confidence of the business sector on the economic recovery.
9 Pages(2250 words)Essay
Macroeconomics
Money & how it is created – Economics is the study of money in simple terms. Money can be notes, coins, credit / debit cards, deposits, gold and even land or such possessions which has some purchasing power. We
3 Pages(750 words)Essay
Macroeconomics
It further explains the rational expectations of labour markets to predict behaviour of economy, from a macroeconomic view. Through these models and theories, factors contributing to
8 Pages(2000 words)Essay
Macroeconomics
Persistent rise in prices tend to make the volatility of the inflation rate to increase. This makes it even harder to place a money value. a) Amount issued by the central bank of Fiji in Fijian dollars=$1,000,000. If there is none of currency
3 Pages(750 words)Assignment
Macroeconomics
There are several macroeconomic variables like the rate of interest, the national income, the savings and spending rates and the existence of trade in the country, that are have their effect on these indicators. These indicators and their relationship with the
10 Pages(2500 words)Essay
Macroeconomics
This policy will lead to increase in demand in the market in order to enhance economic growth. The expansionary fiscal policy will consist of: The Expansionary Fiscal Policy should be used with the objective of stabilizing prices,
4 Pages(1000 words)Research Paper
Let us find you another Essay on topic Macroeconomics problems for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us