Topic 13 answers PDF

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topic 13 review answers...

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ECO 202: Topic 13 Open Economy Macro Review 1. Chapter 19 (pp. 540 – 542; 547 – 554)  conversion of exchange rates between currencies; conversion of prices using exchange rate  supply-demand analysis of a foreign exchange market  effects of currency appreciation or depreciation on domestic economy  how monetary policy affects exchange rate  trilemma of international macroeconomics Practice:

1. 2. 3. 4. 5. 6.

7.

Use the following information to answer questions 1 – 3. The price of an avocado is 15 pesos in Mexico The price of an avocado is $1 in the U.S. If $1 = 16 pesos, is it cheaper to buy avocados in the US or in Mexico?  Mexico If $1 = 14 pesos, has the peso appreciated or depreciated against dollar compared to $1 = 16 pesos?  Peso appreciated If $1 = 14 pesos, is it cheaper to buy avocados in the US or in Mexico?  US True or False: If 1 euro = 5 CA$, then 1 CA$ = 0.2 euro. True or False: Fixed exchange rate means the value of a currency is determined in the foreign exchange market through a fixed number of transactions. Fill in the blanks with “increases” or “decreases”: In an open economy with a flexible exchange rate, expansionary monetary policy INCREASES aggregate demand because it DECREASES interest rates, INCREASES investment, DECREASES the value of its currency, and INCREASES net exports. True or False: The trilemma of international macroeconomics only applies to countries that adopt the floating exchange rate policy....