ECON 401 Assignment 3, Version D
Assignment 3 consists of four questions worth a total of 100 possible marks. It
constitutes 10% of your final grade. You should complete and submit this
assignment after you have completed all the learning activities for Unit 3.
Prepare a 300–350-word answer for each question, and submit all four responses in
one Microsoft Word (or compatible) document.
1.
The opening case of Chapter 10 of the textbook explains the implications of
changing currency values on the Japanese yen and on businesses in Japan.
(a) Explain how the relatively weak value of the yen against the US dollar has
affected the Japanese economy? What was the economic effect when the
Japanese yen increased in value?
(b) Explain the concept of carry-trade, and explain how it has been a boon
and a bust for the Japanese currency from 2000 to 2012.
2.
(a) In the early 2000s, Russia cut tax rates for individuals and corporations,
and government tax revenues surged. Why? Does this result suggest that the
IMF policy prescriptions were wrong?
(b) What does the decline in the value of the ruble against the US dollar
between 1992 and 1998 teach you about the relationship between inflation
rates and currency values?
3.
Why has the global capital market grown so rapidly in recent decades? Do
you think this growth will continue through the next decade? Why or why not?
4.
(a) Explain the difference between “hot money” and “patient money.” Why
might a country wish to attract one type of money over the other? What are
the costs and benefits of each?
(b) What is the difference between a spot exchange rate and a forward
exchange rate?
ECON 401v6
Assignment 3D
August 2015
