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How to do part b?
Question: Suppose that the following set of equations summarizes Thailand's economy before 1997 financial c...

Show transcribed image text Suppose that the following set of equations summarizes Thailand's economy before 1997 financial crisis. Thailand bhat was pegged to a basket of currencies with the largest weight given to the US dollar. All numbers are in billions of dollars. Xo = $70 (exports of goods and services) Mo = $94 (imports of goods and services) m = 0.05 (marginal propensity to import) Y = $800 (national income) KA = (rd – rf) 240 (capital account balance) rd = 0.20 (Thailand interest rate) rf = 0.10 (US interest rate) Measure Thailand's current account balance (CA), capital account balance (KA), official settlement account balance (OSB), and official reserve transaction balance (ORT). B. Use a foreign exchange market diagram to determine whether and why Thai baht was overvalued or undervalued with respect to the dollar, relative to the market determined exchange rate

Suppose that the following set of equations summarizes Thailand's economy before 1997 financial crisis. Thailand bhat was pegged to a basket of currencies with the largest weight given to the US dollar. All numbers are in billions of dollars. Xo = $70 (exports of goods and services) Mo = $94 (imports of goods and services) m = 0.05 (marginal propensity to import) Y = $800 (national income) KA = (rd – rf) 240 (capital account balance) rd = 0.20 (Thailand interest rate) rf = 0.10 (US interest rate) Measure Thailand's current account balance (CA), capital account balance (KA), official settlement account balance (OSB), and official reserve transaction balance (ORT). B. Use a foreign exchange market diagram to determine whether and why Thai baht was overvalued or undervalued with respect to the dollar, relative to the market determined exchange rate