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Chapter 33: Q.15 (page 753)

At point E in Figure 33-4, how many dollars per year are traded for the equilibrium quantity of pounds?

Short Answer

Expert verified

30billion pounds are traded for the equilibrium quantity of dollars.

Step by step solution

01

Given Information

Under the adaptable/drifting conversion scale framework, very much like the basic hypothesis of interest and supply, the interest for money bears an opposite relationship with its cost (regarding the homegrown cash of the nation), its stockpile displays an immediate relationship with its cost (concerning the homegrown money).

02

Explanation

The place of connection of the interest and supply bends yields the balance amount and cost of the unfamiliar money in the unfamiliar trade.

Now, 拢1=$1.50from the equilibrium point E figure and the pounds exchanged are 拢30billion per year. At this money value, the interest for and supply of pounds clears the market.

Hence30 billion pounds are traded for the equilibrium quantity of dollars.

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Most popular questions from this chapter

Suppose that initially in Figure 33-8, the market for Bahrain's currency, the dinar, is in equilibrium at point E1. Now, however, an increase in the U.S. real interest rate has occurred even as real interest rates in Bahrain and elsewhere in the world either have declined or have remained unchanged. What must Bahrain's central bank do, and why, if it wishes to maintain a fixed exchange rate?

Distinguish between the balance of trade and the balance of payments and identify the key accounts within the balance of payments

Identify whether each of the following items creates a surplus item or a deficit item in the current account of the U.S. balance of payments.

a. A Central European company sells products to a U.S. hobby-store chain.

b. Japanese residents pay a U.S. travel company to arrange hotel stays, ground transportation, and tours of various U.S. cities, including New York, Chicago, and Orlando.

c. A Mexican company pays a U.S. accounting firm to audit its income statements.

d. U.S. churches and mosques send relief aid to Pakistan following a major earthquake in that nation.

e. A U.S. microprocessor manufacturer purchases raw materials from a Canadian firm.

Outline how exchange rates are determined in the markets for foreign exchange and discuss factors that can induce changes in equilibrium exchange rates

Why would a naira depreciation cause Nigerian exports to become less expensive to residents of other nations?
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