Answer the following questions:
1. Draw 5
separate graphs with a supply curve and demand curve for the exchange of the
EURO currency. For the exchange rate,
use the EURO/Dollar exchange rate (the dollar price of the EURO). Use one of the graphs for each of the
following questions.
a. GRAPH 1:
Show what increased American travel to Europe would do to the market for EUROS.
Make a change to the graph, and explain what happens to the value of the EURO.
Label the graph.
b. GRAPH 2:
Show what increased European investment in the US stock market would do to the
market for EUROS.. Make a change to the graph, and explain what happens to the
value of the EURO. Label the graph.
c. GRAPH 3:
Show what increased US exports of goods to Europe would do to the market for
EUROS. Make a change to the graph, and explain what happens to the value of the
EURO. Label the graph.
d. GRAPH 4:
Show what increased US imports of goods from Europe would do to the market for
EUROS. Make a change to the graph, and explain what happens to the value of the
EURO. Label the graph.
e. GRAPH 5:
Show what would happen to the EURO market if everyone forecasted the US dollar
to appreciate against the EURO. Make a change to the graph, and explain what
happens to the value of the EURO. Label the graph.
2. Discuss
and evaluate all of the various causes or contributors to the 2007-2009
financial crisis.
3. Evaluate
both sides of the free trade debate:
Free trade is good?Or we should adopt protectionist policies.?Talk about
reasons for both sides.
4. Country A
can produce either 100X and 0Y OR it can produce 0X and 300Y. Similarly, Country B can produce either 50X
and 0Y OR it can produce 100X an 0Y.
Identify the opportunity costs of producing EACH good in EACH
country. Identify which country has the
comparative advantage in which good.
5. What
would the pattern of trade be in the above question #4?
6. How does
the exchange rate affect imports and exports of a country? Explain.
7. If Mexico
devalues the peso, what would happen to their trade balance?
8. The
United States imports more goods from China than China imports from the United
States. Should Congress stop this? How? Or would that be a mistake? What are
your arguments?
9. Assume
both Taiwan and Vietnam can produce bicycles and computers. Taiwan can produce 3 million computers or 6
million bikes. Vietnam can produce 1
million computers or 3 million bikes.Answer the following: (EXPLAIN everything)
i. Which
country has an absolute advantage in producing computers?Bicycles?
ii. In
Taiwan, what is the relative price of producing 1 computer? (opportunity cost)
iii. In
Vietnam, what is the relative price of producing 1 computer? (opportunity cost)
iv. Which
country has a comparative advantage in producing computers? Bicycles?
v. For
international trade to take place, what must be true about the international
relative price of computers?
vi. Draw
Taiwan’s Production Possibilities Curve
vii. Draw
Vietnam’s Production Possibilities Curve.
viii. Show
above on each country’s PPF curve how each can gain from trade with the other
country.
10. Explain
China’s exchange rate policy and what benefit they see from it.
11. On Monday
the exchange rate was 100 Yen per dollar.
On Tuesday, the exchange rate was 110 Yen per dollar. Explain which currency appreciated and which
depreciated.
12. What does
it mean to have an undervalued currency?
What does it mean to have an overvalued currency? What are the benefits of each? The costs?
13. What is
the subprime loan market, and what significance has it had for the United
States recently. Explain in detail.
14. The US has
millions of unemployed workers. Some
argue that we could use import tariffs to help them get back to work here in
the US. How does this argument work?
Explain. In response, others say there
are risks with doing this. What are
these counter-arguments? Explain
