Please post your responses below by due date as instructed.Please attempt at least 5 of the followin

Please post your responses below by due date as instructed.Please attempt at least 5 of the following questions as optionalassignments. However, a maximum of extra 10 points (equivalent ofabout 2 points toward course grade) will be awarded, if attemptedand substantiated. 1) “A balance of trade deficit must always beoffset by net capital inflows from abroad.” Agree or disagree withthis statement and explain. 2) Suppose a Japanese firm buys a 1year treasury bill with a face value of $10,000 today for $9400. Ifthe value of the dollar declined from 90 to 80 yen during the year,what rate of return does the Japanese firm earn on its investment?3) Draw a supply-demand diagram of the foreign exchange market forthe dollar (valued in euros/$) Show the effects of the followingevents on the exchange rate. Explain your reasoning! a) The releaseof data showing stronger than expected RGDP growth in Germany. b)An increase in the federal funds rate by the Federal Reserve c) Anannouncement that U.S. trade deficits for the last quarter weremuch larger than previously expected d) A larger than expectedincrease in hourly wage rates in the US. 4) If the Fed wished todefend the exchange rate of the $ (i.e. prevent the $ exchange ratefrom falling) what policy action could it take? Explain. 5a) Whatis the “purchasing power parity” theory of exchange rates? If theprice of a representative bundle of tradable goods is currently$5000 in the U.S. and 550000 yen in Japan, is the $ undervalued orovervalued when the exchange rate is 90 yen per $? 5b) Why don’tactual exchange rates move to purchasing power parity levels in theshort run? 6) The treasurer of a U.S. firm noted that althoughshort run deposits in Swiss bank accounts had earned the firm onlya 3% annualized return when measured in Swiss francs, in dollarsthe firm had realized a 12% rate of return. Explain as precisely aspossible how this was possible. 7) In recent years the exchangerate of the $ has been noticeably high against the yen. If for somereason investors around the world now decide that this increase isa temporary phenomena and that the $ will fall relative to the yenin coming months, what would be the effect on prices of U.S.Treasury Securities? Explain. 8) Do US producers of tradable goodsprefer a strong dollar or a weak dollar in currency markets?Explain. . . .

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