Economics and Statistics

Hello all, it's been quite some time since I have made any major announcements since the creation of this blog about a year and a half ago. I am currently in graduate school and will soon take a portion of my comprehensive examination (i.e exams in Micro, Macro, and Metrics that will allow me to continue my studies in my graduate program), wish me luck! Thus, I will not be able to post consistently until at least mid-June. The roadmap is as such, if I pass, I will start introductory lessons in Econometrics and Statistics (if not, then I'll have to study until I can retake the comps in August). I hope that once I am done, I will be able to add more advance materials to the blog, such as general equilibrium, indirect utility functions, and game theory/mechanism design for Micro. The Solow, Ramsey, RBC, New Keynesian models, permanent income hypothesis (PIH) and more for Macro. By the way I think I still need to add notes on the IS-LM curves, so I will do that before jumping to th

Assume that the U.S government wants to start fixing its currency against the Mexican peso.   Government officials estimate that the optimal exchange rate should be at one peso for $0.35.  You are given the following information about the U.S market for Mexican peso: Find how much peso does the U.S needs to buy or sell in order to achieve its targeted exchange rate. Find the original equilibrium exchange rate: let the demand equal to the supply curve. Just like in the previous exercise, we see that one peso is worth half a U.S dollar and there are 6,250,000 pesos demanded at this price. Now, in order to change the exchange rate, realize that the U.S government has access to U.S dollars (for the sake of the argument, assume the central bank is no longer independent). Then, it can only shift the demand for Mexican pesos in the U.S foreign exchange market. Thus, there must only be a movement along the supply curve, set $=0.35 in the supply schedule and solve for p. Now, calculate the gap