Consider a basket of consumer goods that costs $90 in the United States. The same basket of goods costs CNY 105 in China. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table. Cost of Basket in U.S. Cost of Basket in China (Dollars) (Yuan) 90 105 105 90 Nominal Exchange Rate (Yuan per dollar) 7.00 10.50 Real Exchange Rate (Baskets of Chinese goods per basket of U.S. goods)
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- 7. Computing real exchange rates Consider a basket of consumer goods that costs $18 in the United States. The same basket of goods costs JPY 570 in Japan. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table. Cost of Basket in U.S. Cost of Basket in Japan (Dollars) (Yen) 18 570 18 570 Nominal Exchange Rate (Yen per dollar) 95.00 76.00 Real Exchange Rate (Baskets of Japanese goods per basket of U.S. goods)The demand for Australian dollars in the foreign exchange market equals 14000 – 3000e and thesupply of Australian dollars in the foreign exchange market equals 2000 + 2000e, where e is thenominal exchange rate expressed in euros per Australian dollar. If the Australian dollar is fixed at 2euros per Australian dollar, then to maintain this fixed rate, what is the required change in theReserve Bank of Australia’s holdings of euros? 1increase by 4000 euros 2decrease by 2000 euros 3decrease by 4000 euros 4increase by 2000 eurosConsider a basket of consumer goods that costs $60 in the United States. The same basket of goods costs NOK 40 in Norway. Holding constant the cost of the basket in each country, compute the real exchange rates that would result from the two nominal exchange rates in the following table. Cost of Basket in U.S. (Dollars) 60 60 Cost of Basket in Norway (Kroner) 40 40 Nominal Exchange Rate (Kroner per dollar) 3.00 2.00 Real Exchange Rate (Baskets of Norwegian goods per basket of U.S. goods)
- Q.1.11 What is a foreign exchange rate? (a) The rate at which the currency of one country trades for the goods ofanother country.(b) The rate at which one country’s goods trade for those of anothercountry.(c) The rate at which currencies of different countries are exchanged.(d) The rate at which one country’s currency trades for gold provided byanother country.Q.1.12 As a result of more Americans visiting South Africa, we can expect, ceteris paribus:(a) an appreciation of the rand relative to the dollar.(b) a depreciation of the rand relative to the dollar.(c) an appreciation of the dollar relative to the rand.(d) that it will cost South Africans more to visit the United States.Q.1.13 What is a tariff? (a) A form of subsidy.(b) A tax on imported goods.(c) A tax on foreign property.(d) A form of quota.D2 The Steel was sold $650 / ton in the U.S.; the same type of steel was sold for Euro 400/ton. If the nominal exchange rate between Euro and dollar is $1.12/Euro, what is the real exchange rate between U.S. steel and European Steel? Which currency is overvalued (given a brief reason for your thought based on purchasing power parity)?E1 The higher the value of e, the ______________(More or less) units of foreign currency a dollar buys. When a nominal exchange rate goes up, we say the domestic currency is _________(appreciating or depreciating) against the foreign currency. When a nominal exchange rate goes down, we say that the domestic currency is _________(depreciating or appreciating) against the foreign currency.
- 3 / 3 100% 每 8. The price of a laptop in the United States is $1,000. The price of a car in taly is 10,000 euros The current exchange rate rs09 curos per dollr. Ifa laptop is exported from the United Startes to Italy with no barriers to trade, what will be the price of the aptop in Italy? Ira car is imported to the United States from luh with barriers to trade, what will be the price of the crin ahe Ented Statres? Suppose the dollar appreciates by 0pereent aganscihecomo. Whr will be the price ofa computer exporied from the United States changem ltaly? -Suppose thhe dollarapprecites br 10 percentagamst the curoWt willbethe price of a car inmported to the Enred States from Ital chnge m tdhe Eaed Statese (8 marks) (2marks) 2marks) (2marks] (2marks)Jan 2, 2015 Sep 27, 2016 $1.20 $1.12 1 British Pound (GBP) $1.56 $1.30 1 $US 1 $US 1 Euro 119.69 Yen 2.66 BRL 1. In relation to the Euro, has the $US has appreciated or depreciated from Jan 2015 to Sep 2016? 2. In relation to the Euro, has the GBP has appreciated or depreciated from Jan 2015 to Sep 2016? 3. How many Brazilian Reals (BRL) would be needed on Sep 27, 2016 to purchase Yen 10 million?The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The column names are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency per unit of US dollar. Year 1979 1984 i. DNK: O Increased ii. ISL: DNK O Increased 5.2610 10.3566 Decreased Remained unchanged Decreased Nominal a. Indicate whether the cost of goods in each country has increased, decreased, or remained unchanged, relative to the cost of goods in the United states between 1979 and 1984. Remained unchanged ISL 3.5260 31.6937 DNK 0.6621 1.1781 Real ISL 0.8612 1.3433
- 1. In 1960 a U.S. dollar sold for 620 Italian lire. If PPP held in 1960, what would the PPP value of the exchange rate have been in 1987 if Italian prices rose 12 times and U.S. prices rose 4 times between 1960 and 1987?** • The Mexican Pese has weakened considerably relative to the dollar and trying to decide whether this is good time to invest in Mexico. you are Support exchange the current rate of the Mexican Peso relative to the 0x feller is MXN(S-8202/USD. Your investment advisor argues that the fee will love 102 of its value relative to the follar What is the invertment advicer's forecart of the exchange rate in lys? over the next year.Give typing answer with explanation and conclusion Consider the exchange rate between U.S. Dollar and Mexican Peso: USD/MXN. Initially, the supply curve for USD is 100 + eN bln dollars per week and the demand curve is 140 - eN bln dollars per week. There is a financial crisis in Mexico and the government fears that it may lead to capital outflows that would make the crisis even worse. They decide that if Mexican Peso depreciates by more than 20% the central bank will step in and fix the exchange rate. As the crisis unfolds the demand for the U.S. dollars increases to 142 - eN and the supply of dollars falls to 99 + eN. How should the central bank of Mexico react to this change?