Supply curve and demand curve for the exchange of the EURO

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