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IMS 3310 Exam 1 STUDY GUIDE SOLUTIONS

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IMS 3310 Exam 1 STUDY GUIDE SOLUTIONS Interest Rates, Currency, and the Balance of Trade. (Cause & Effects) - ANSWER-Interest Rates RISE = People borrow more, U.S. dollar will *depreciate* in value, Exports will rise as imports decrease (*Surplus* Position) - If we import more than we export, ...

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  • October 30, 2024
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IMS 3310 Exam 1 STUDY GUIDE

SOLUTIONS


Interest Rates, Currency, and the Balance of Trade.


(Cause & Effects) - ANSWER✔✔-Interest Rates RISE = People borrow more, U.S. dollar will *depreciate*

in value, Exports will rise as imports decrease (*Surplus* Position)


- If we import more than we export, there will be a Balance of Trade *Deficit*, country is spending more

money for goods.


- This 3-legged relationship is *self-correcting*.


Drivers of Globalization - ANSWER✔✔-- Technological Advancements


- Free Markets and Lower trade barriers


- Political Integration (fewer restrictions)


- Inter-governmental organizational cooperation


- The internet, flow & access of information


- Freer flow of investment and money

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, ©EMILLECT 2024/2025 ACADEMIC YEAR. ALL RIGHTS RESERVED

FIRST PUBLISH OCTOBER 2024




Purchasing Power Parity - ANSWER✔✔-Compares different countries currencies through a market

"basket of goods" approach.




U.S. GNI/capita = $53,670


Thailand GNI/capita = $170, 766 baht = $14,658


*11.65 baht per US dollar so (170,766/11.65) = $14,658


Official Exchange Rate = 31.80 baht/$1


*Thailand's GNI = $5,370 therefore 10% nominal rate


Basket of Goods = 1,865 in Thailand & $160.05 in U.S.




Thailand's GNI is 27% that of the U.S.


(14,658/53960)


- ANSWER✔✔-


Absolute Advantage - ANSWER✔✔-Producer requires a *smaller quantity inputs* to produce a good




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