3.A net sale of official reserves by a nation’s treasury or central bank creates
ID: 1225175 • Letter: 3
Question
3.A net sale of official reserves by a nation’s treasury or central bank creates a
4.Balance-of-payments deficits and surpluses are not deficits and surpluses in the overall balance of payments account because
11.A trade deficit
13.Suppose Super D’Hiver—a hypothetical French snowboard retailer—wants to order 5000 snowboards made in the United States. The price per board is $200, the present exchange rate is 1 euro = $1, and payment is due in dollars when the boards are delivered in 3 months.
Exchange-rate risk might make the French retailer hesitant to place the order because the anticipated price might
14.Suppose Super D’Hiver—a hypothetical French snowboard retailer—wants to order 5000 snowboards made in the United States. The price per board is $200, the present exchange rate is 1 euro = $1, and payment is due in dollars when the boards are delivered in 3 months.
A speculator would be willing to sign such a contract if they expect the value of the
16.Suppose that a country has a trade surplus of $50 billion, a balance on the capital account of $10 billion, and a balance on the current account of – $200 billion. The balance on the capital and financial account will be:
19.Suppose that the government of China is currently fixing the exchange rate between the U.S. dollar and the Chinese yuan at a rate of $1 = 6 yuan. Also suppose that at this exchange rate, the people who want to convert dollars to yuan are asking to convert $10 billion per day of dollars into yuan, while the people who are wanting to convert yuan into dollars are asking to convert 36 billion yuan into dollars. What will happen to the size of China’s official reserves of dollars?
20.a. Suppose that a country follows a managed-float policy but that its exchange rate is currently floating freely. In addition, suppose that it has a massive current account deficit.
Does it also necessarily have a balance-of-payments deficit? (Click to select)YesNo.
b. If it decides to engage in a currency intervention to reduce the size of its current account deficit, will it buy or sell its own currency? (Click to select)Buy its own currencySell its own currency.
c. As it does so, will its official reserves of foreign currencies get larger or smaller? (Click to select)LargerSmaller.
d. Would that outcome indicate a balance-of-payments deficit or a balance-of-payments surplus? (Click to select)Neither, the account is in balanceBalance-of-payments deficitBalance-of-payments surplus.
21.
If the economy booms in the United States while going into recession in other countries, the U.S. trade deficit will tend to _________________.
balance-of-payments surplus. surplus in the overall account. balance-of-payments deficit. deficit in the overall account.Explanation / Answer
As per Chegg guidelines, first 4 questions are answered below.
Kindly ask rest of the questions in different posts.
3) c. balance-of-payments deficit.
This is because the balance of payments must always sum to zero. This deficit is in a subset of the overall balance statement and is not a deficit in the overall account.
4) d. newly acquired foreign currency adds to the stock of official reserves.
11.) a. allows the Unites States to consume outside its production possibilities curve but reduces future consumption.
This is because the country is in deficit of money or trade balance
13.) c. rises if the euro loses value relative to the dollar.
This can lead to losses for the retailer due to fall in value
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