国际经济学多米尼克萨尔15ch课后答案

Answer to Problems

1. a. The rate of inflation in the United Kingdom from 1973 to 2001 was:

116.1 – 15.6 = 100.5 = 1.460 or 146.0%

(116.1+15.6)/2 68.85

On the other hand, the rate of inflation in the United States from 1973 to 2001 was:

112.1 – 34.3 = 77.8 = 1.063 or 106.3%

(112.1+34.3)/2 73.2

Thus, the inflation rate in the United Kingdom minus the inflation rate in the United States

from 1973 to 2001 was:

146.0% - 1063% = 39.7%

From 1973 to 2001, the British pound depreciated with respect to the U.S. dollar from

£0.4078 to the dollar in 1973 and £0.6944 per dollar in 2001 or by

0.6944 – 0.4078 = 0.2866 = 0.520 or 52.0%

(0.6944+0.4078)/2 0.5511

b. The relative PPP theory did hold only to the extent that the rate of inflation was higher in the

United Kingdom and the pound depreciated with respect to the U.S. between 1973 and 2001.

But the percent depreciation of the British pound with respect to the dollar was much greater than that predicted by the relative PPP.

Note that in the above calculations, percentage changes were obtained by the average

of the beginning and end values. You may want to ask the class to do the same when

assigning this and the next problem so as to get the same answer.

2. The rate of inflation in Switzerland from 1973 to 2001 was:

103.2 – 45.0 = 58.2 = 0.785 or 78.5%

(103.2+45.0)/2 74.1

Thus, the inflation rate in Switzerland minus the inflation rate in the United States (found in

Problem 1a) is:

78.5% - 106.3% = -27.8%

From 1973 to 2001, the Swiss franc appreciated with respect to the U.S. dollar from

3.1648 Swiss francs per dollar in 1973 to 1.6876 Swiss francs per dollar in 2001 or by

1

1.6876 - 3.1648 = -1.4772 = -0.609 or –60.9%

(1.6876+3.1648)/2 2.4262

The relative PPP theory did hold only to the extent that the rate of inflation was lower in Switzerland and the Swiss franc appreciated with respect to the U.S. between 1973 and 2001.

But the percent appreciation of the Swiss franc with respect to the dollar was much greater than that predicted by the relative PPP.

3. a. Md=kPY=(1/V)(PY)=(1/5)(200)=$40 billion.

b. If the nation's nominal GDP rises to $220 billion, Md=220/5=$44 billion.

c. If the nation's nominal GNP increases by 10 percent each year,

Md increases also by 10 per cent each year.

4. a. Monetary base of the nation is,

D+F=8+2=$10 billion.

b. The value of the money multiplier is,

m=1/LLR=1/0.25=4.

c. The value of the nation's total money supply is

Ms=m(D+F)=4(8+2)=$40 billion

5. a. Md=Ms and the nation is in balance of payments equilibrium.

b. Md of $44 billion exceeds Ms of $40 by $4 billion.

With m=4, there will be an inflow of money or international reserves from abroad of $1

billion to equate Ms to Md. Thus, the nation's balance of payments surplus will be equal

to $1.

The nation will face a continuous inflow of money or international reserves, year in and year out.

7. Md=100/4=25 falls short of Ms=30 and there will be an outflow of international reserves

(a deficit in the nation's balance of payments).

8.According to the monetary approach, inflation in the second nation is caused by excessive

money creation there. As a result, either the first nation's exchange rate has to appreciate

to keep its balance of payments in equilibrium or its monetary base will rise (so that inflation

will spread to nation 1).

2