Macro Soalan Jawapan

Topics: Inflation, Supply and demand, Aggregate demand Pages: 7 (1631 words) Published: April 20, 2015
1. Do all international financial transactions necessarily involve exchanging one nation’s distinct currency for another? Explain. Could a nation that neither imports goods and services nor exports goods and services still engage in international financial transactions? LO1

Answer: The answer is almost certainly a yes. Only in rare cases would you find barter exchanges (goods and services for other goods and services). Yes, they could engage in financial transactions (the exchange of assets across countries).

3. Refer to following table, in which Qd is the quantity of yen demanded, P is the dollar price of yen, Qs is the quantity of yen supplied in year 1, and Qs' is the quantity of yen supplied in year 2. All quantities are in billions and the dollar-yen exchange rate is fully flexible. LO3

a. What is the equilibrium dollar price of yen in year 1?
b. What is the equilibrium dollar price of yen in year 2?
c. Did the yen appreciate or did it depreciate relative to the dollar between years 1 and 2? d. Did the dollar appreciate or did it depreciate relative to the yen between years 1 and 2? e. Which one of the following could have caused the change in relative values of the dollar and yen between years 1 and 2: (1) More rapid inflation in the United States than in Japan; (2) an increase in the real interest rate in the United States but not in Japan; or (3) faster growth of income in the United States than in Japan.

Answers: a. 115; b. 120; c. yen appreciated; d. dollar depreciated; (1) More rapid inflation in the United States than in Japan.

Feedback: Consider the following example. Refer to following table, in which Qd is the quantity of yen demanded, P is the dollar price of yen, Qs is the quantity of yen supplied in year 1, and Qs' is the quantity of yen supplied in year 2. All quantities are in billions and the dollar-yen exchange rate is fully flexible.

(a) What is the equilibrium dollar price of yen in year 1?
The equilibrium is 115, where Qd equals Qs (Qd = Qs =20).

(b) What is the equilibrium dollar price of yen in year 2?
The equilibrium is 120, where Qd equals Q's (Qd = Q's =15).

(c) Did the yen appreciate or did it depreciate relative to the dollar between years 1 and 2? Since the price of the Yen increased (more dollars must now be given up to purchase one more Yen), the Yen as appreciated.

(d) Did the dollar appreciate or did it depreciate relative to the yen between years 1 and 2? Since the price of the Yen increased (more dollars must now be given up to purchase one more Yen), the dollar depreciated.

(e) Which one of the following could have caused the change in relative values of the dollar and yen between years 1 and 2: (1) More rapid inflation in the United States than in Japan; (2) an increase in the real interest rate in the United States but not in Japan; or (3) faster growth of income in the United States than in Japan. (1) More rapid inflation in the United States than in Japan. The increase in the relative price of goods and services in United States, as result of inflation, reduces the quantity of Yen supplied to the market as Japanese consumers buy more 'home' goods and services.

5. Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? LO3 a. An increase in aggregate demand.

b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in aggregate demand.
e. An increase in aggregate demand that exceeds an increase in aggregate supply.

Answer:
(a)Price level rises rapidly and little change in real output. (b)Price level rises and real output decreases.
(c)Price level does not change, but real output increases.
(d)Price level does not...
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