Determine which account of the Balance of Payments is affected by each of the following transactions.
Current Account - Transfers)
A local firm ships US$80 million of merchandise to China
National Commercial Bank, a local company, pays US$1 million in dividends to foreign shareholders
A German company builds a manufacturing facility in your country.
A local resident purchases a retirement condo in Florida for US$10 million.
You invest in the South Korean stock market by buying US$500 in stock.
Consider three countries Hungary, Mexico and the United States, which sell identical t-shirts.
If the price of the t-shirt is 500 forint, 20 pesos and US$2.
Calculate the purchasing power parity exchange rate between
Suppose the current exchange rate between the Mexican peso and the US dollar is 12 peso = US$! and the exchange rate between the Hungarian forint and the US dollar is 215 forint = US$1.
Based on the PPP calculations in part a, what do you expect to happen to the exchange rate between: