Macroeconomics/ currency rates exchanges

1.Following its 1999 crisis, Brazil allowed the value of its own currency, the real, to depreciate sharply
relative to the dollar. Brazil accounted for 30 percent of Argentina’s foreign trade at the time. If the
peso had not been linked to the dollar, which of the following would have been to Argentina’s advantage: to
let the peso depreciate relative to the dollar along with the real, to hold it constant relative to the
dollar, or to move in the opposite direction from the real and appreciate relative to the dollar? Why?
2.What is the value of the Argentinian peso today? Has it been appreciating, depreciating, or stable in
recent months? Summarize the current state of the Argentine economy; based on Internet news sources (be sure
to add those sources to your references).
3.Draw a diagram showing supply and demand in the market where the U.S. dollars (USD) are exchanged for the
Canadian dollars (CAD).  Put CAD per USD on the vertical axis.  The supply curve represents the quantity of
USD offered in exchange for CAD.  The demand curve represents the quantity of USD that people want to buy in
exchange for CAD.
Suppose that initially the two dollars are “at par,” that is, 1 USD = 1CAD.  Next, suppose a housing
construction boom in the United States raises the demand for imports of Canadian lumber.  Will that shift
the supply curve, the demand curve, or both in your diagram?  Will the USD appreciate or depreciate?

4.Under the gold standard, if the price of an ounce of gold is 1,400 U.S. Dollars and 1,300 Canadian
Dollars, what is the exchange rate between U.S. and Canadian dollars?

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