International Economics
Course 6 2-10-2018 Jurne Sleddens
Exercise 1
You except 1 million USD in 3 months you decide to buy a 3 M FWD contract.
[Premium discount basic points] > * Spot: USD/EUR 0.8531
1M FWD USD/EUR= -2.5600
3M FWD USD/EUR = -3.4800
In 3 months from now, USD/EUR = 0.8000
Will you regret? Yes, because you get more dollars when the USD/EUR rate is 0.8000 then when the
USD/EUR is 0.8527 (= 0.8531- 3.4800 basic points).
Exercise 2
The European Central Bank wants to increase money supply. Name 3 concrete measures, printing
money does not count.
o Open market operations
Buy some bonds from the public.
o Required Reserve Ratio (RRR)
o Discount rate instrument
Decrease the discount rate.
International trade
When a country exports more than it imports it’s called a trade surplus.
But when imports are bigger than exports it’s called a trade deficit.
What influences import/export aka trade surplus/deficit.
Domestic savings are higher than the higher investments in that economy typically we see a
trade surplus. When we see domestic savings are smaller than domestic investments typically
we see a trade deficit. This is due central banks in the country doesn’t have enough domestic
savings so they can’t loan it to organizations which want to loan it. So US banks for example
lack fonds, fonds come from abroad, so demand for US goes up which makes the US stronger
which is good for importing which means trade deficit.
Protectionism
Importquota
o You can import a product for a maximum of x in the total EU for example.
Tariffs
o Raise the price of a product which affects the price of a product which affects the
demand. No quota on the maximum import.
Non-tariff barrier
o Barriers that doesn’t influence money like for example quality standards
Course 6 2-10-2018 Jurne Sleddens
Exercise 1
You except 1 million USD in 3 months you decide to buy a 3 M FWD contract.
[Premium discount basic points] > * Spot: USD/EUR 0.8531
1M FWD USD/EUR= -2.5600
3M FWD USD/EUR = -3.4800
In 3 months from now, USD/EUR = 0.8000
Will you regret? Yes, because you get more dollars when the USD/EUR rate is 0.8000 then when the
USD/EUR is 0.8527 (= 0.8531- 3.4800 basic points).
Exercise 2
The European Central Bank wants to increase money supply. Name 3 concrete measures, printing
money does not count.
o Open market operations
Buy some bonds from the public.
o Required Reserve Ratio (RRR)
o Discount rate instrument
Decrease the discount rate.
International trade
When a country exports more than it imports it’s called a trade surplus.
But when imports are bigger than exports it’s called a trade deficit.
What influences import/export aka trade surplus/deficit.
Domestic savings are higher than the higher investments in that economy typically we see a
trade surplus. When we see domestic savings are smaller than domestic investments typically
we see a trade deficit. This is due central banks in the country doesn’t have enough domestic
savings so they can’t loan it to organizations which want to loan it. So US banks for example
lack fonds, fonds come from abroad, so demand for US goes up which makes the US stronger
which is good for importing which means trade deficit.
Protectionism
Importquota
o You can import a product for a maximum of x in the total EU for example.
Tariffs
o Raise the price of a product which affects the price of a product which affects the
demand. No quota on the maximum import.
Non-tariff barrier
o Barriers that doesn’t influence money like for example quality standards
