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Problem:

The table below gives information on foreign trade for a country. a. Using the initial information, what is the country's trade deficit? b. If the government undertakes policies to depreciate the currency 18%, what will be the immediate effect on the trade balance? c. After the pass-through period (when the quantity has fully adjusted to the new numbers given below and the exchange rates are still at the new rate), what will the trade balance be?

Initial spot rate 2.30

Average export price 17.50

Average import price 12.00

Export quantity 230

Import quantity 190

New export quantity 360

New import quantity 145

Please explain in detail and show all work.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147513

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