1. 3. 4. The Canadian price level is 110, the Japanese price level is 94. 4, and
ID: 1094941 • Letter: 1
Question
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The Canadian price level is 110, the Japanese price level is 94. 4, and the real exchange rate is 104 Japanese real GDP per unit of Canadian real GDP. What is the nominal exchange rate? The nominal exchange rate is yen per dollar. In the graph, the initial aggregate supply curve is SAS0 and the initial aggregate demand curve is AD0. Some events that could have changed aggregate demand from AD0 to ADX are The table gives you information about the economy of the United Kingdom. What is the marginal propensity to consume? The marginal propensity to consume isExplanation / Answer
1. To calculate the nominal exchange rate, simply measure how much of one currency is necessary to acquire one unit of another. The real exchange rate is the nominal exchange rate times the relative prices of a market basketof goods in the two countries. Hence,
Nominal Exchange Rate = 104*(110/94.4) = 121.186
2. A decrease in atxes increases the disposable income of the people leading to an increase in the demand. Also, an expectation of future increase in income causes people to save less and hence increasing the demand. Therefore, the correct answer is D.
3. Marginal Propensity to consume (MPC) = Change in consumption/Change in disposable income
MPC = (480-420)/(400-300) = 60/100 = 0.6
4. As people in China save more thier MPS is greater than that of US. As people save more in China hence thier MPC is less than that of people in US. A possible reason could be the confidence of people in US about their future income. Hence the correct answer is B.
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