Ac2211

ECS3350 Coursework

1. The deadline for submitting this Coursework is 1600hrs on Sunday, 6th December 2015.

2. Type your answers on the coursework MS Word file, print it out, and submit your printed Coursework at The Student Office before the due date.

3. Include your Name and Student ID on the front of your submitted coursework.

4. Each answer should be motivated, i.e., you should explain and show your calculations.

5. The bold numbers in brackets indicate the maximum marks to be awarded for that part of the question. The total marks are 30. This Coursework contributes 20% to the final mark for this course.

Student ID:

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Question 1: Are the statements below true or false? Explain the reasons for your answers.

a. A country which decides to join a Monetary Union expects an increased ability to stabilize or stimulate its output, and an increased ability to keep inflation low compared with its initial ability under flexible exchange rates. (2.5 marks)

The answer

b. Suppose that the United States is on a gold standard and the US authorities have committed to exchange an ounce of gold for $35. Suppose that France is on gold standard too and French authorities have committed to exchange an ounce of gold for 60 French Francs. If the exchange rate between French Francs (FF) and US Dollars ($) is FF2/$1, would there be arbitrage opportunities? Is the exchange rate of FF2/$1 correct or not? (2.5 marks)

Question 2: The graph below is the exchange rate of Japanese Yen to US dollar (¥/$) between August and November 2010. On 15th Sept, Yen moved from 83 to 85.7 yen per dollar due to the Japanese authorities’ intervention in the foreign exchange markets to weaken the value of the yen against the dollar, a day after the yen hit a 15-year high against the dollar.

a. Explain how did the...