Question

- Question 1

Steven McGregor had planned his trip to the Rugby World Cup in Japan for almost a year. He had budgeted—saved—€17,000 for expenses while in Japan. But he had postponed exchanging the euros for Japanese yen (JPY or ¥)—until the very last minute on September 17th, doing it at Dublin Airport at JPY 119.23 EUR. Given the following average monthly exchange rates in 2019, when should he have exchanged the euros for yen to maximize his Japanese spending money?

Euro funds for expenses in Japan € 17,000.00

Average exchange rate for the month (JPY = 1.00 Euro):

January ¥125.18

February ¥126.17

March ¥124.38

April ¥124.95

May ¥121.76

June ¥122.71

July ¥121.14

August ¥117.02

September 17 in Airport ¥119.23

- Question 2

Why do firms become multinational?

- Question 3

Why do many emerging market economies prefer to adopt a fixed exchange rate?

- Question 4

With reference to the impossible trinity, what are the possible policy mixes that a nation could have?

Answer 1

(a). when should he have exchanged the euros for yen to maximize his Japanese spending money?

He should have exchanged the euros for japanese yen in August @ yen 117.02, in order to maximise the Japanese spending money.

(b). Why do firms become multinational?

To remove the trade barrier globally also, in order to make maximum minimisation of its cost , to reduce the tax ,to grab more opportunity, to avail other benefts like interest rate etc.

(c). Why do many emerging market economies prefer to adopt a fixed exchange rate?

Because in fixed exchange rate , loss amount is certain , risk is low .

(d.)With reference to the impossible trinity, what are the possible policy mixes that a nation could have?

1. Allowing of free movement of capital, labour.

2. Independent monetary policy;

3. Fixed foreign exchange rate , stable currency