14. If gold and the dollar are substitutes, a cut in the Japanese discount rate
ID: 1122797 • Letter: 1
Question
14. If gold and the dollar are substitutes, a cut in the Japanese discount rate can be expected to a. appreciate the dollar and decrease the price of gold b depreciate he dlar and increasethe price of gold. c. depreciate the dollar and decrease the price of gold. d. appreciate the dollar and increase the price of gold. 15. What are the economic effects of a currency apprediation? a. It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall as well b. It will increase aggregate demand and aggrégate supply, so that output will certainly rise, and prices mayrise as well. may rise as well. may fall as well. aggegate demand and decrease aggregate supply, so that pices will cerainly rise and outpurt d. it will decrease aggregate demand and increase aggregate supply, so that pices will certainly fall and ourpurt 16. Protectionism may reduce imports, andit will also a appreciate the dollar, reducing exports b.appreciate the dollar, increasing exports. c. depreciate the dollar, increasing exports d. depreciate the dollar, reducing exports 17. It presently costs 50 Canadian dollars for a lift ticket at Whistler Ski Resort in British Columbia If the cument value of the Canadian dollar is 0.68 U.S. dollars, how many U.S. dollars does it cost to ski at Whistler? a. $16.00 b.$34.00 c. $73.50 d. $15625Explanation / Answer
14. Option a
When the Japanese discount rate is cut, the demand for dollar would increase as it would yield more returns leading to appreciation of dollar and gold being substitute for dollar its demand decreases.
15. Option d
With the appreciation the price level will increase leading to decreased aggregate demand while the aggregate supply would increase and eventually the price would come down.
16. Option a
With the protectionism it would reduce the imports there by reducing the competition. With the reduced competition the demand for goods increases leading to appreciation of dollar and causing reduction in exports.
17 Option b
1 CD = $0.68 US
50 CD = X
X= 50*0.68 = $34
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