Answer to Question #139670 in Macroeconomics for Ah zhuan

Question

3) Malaysia is the one of the world’s most famous producer of boutique. The global demand for high quality boutique has increases and at the same time Malaysia’s central bank, Bank Negara, has increases the interest rate through contractionary monetary policy. In the foreign exchange market for Malaysian Ringgit, what happens to

a) The demand for Malaysian Ringgit?

b) The supply of Malaysian Ringgit?

c) The quantity of Malaysian Ringgit demanded?

Answer 1

In the foreign exchange market for Malaysian Ringgit,

(a). The export demand for Malaysian Ringgit has fallen following its depreciation. However, the fall in demand for the Ringgit does not affect the demand for Malaysian exports. Thus, the international demand for Malaysian high-quality boutique is still high.

(b). The supply of Malaysian Ringgit has increased leading to the depreciation of Ringgit.

(c). The quantity of Malaysian Ringgit demanded is high due to the country's more exports of high-quality boutique.