Say that in Miami, in Coral Gables, a big mac cost $4.25 and a large fries cost $2.50. In Japan, the total cost of a big mac and large fries is 81 Yen. The according to purchasing power parity, the exchange rate that equalizes purchasing power of this basket of goods is O 8.5 O 12 O 6.5 O 10
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- Dollars per Franc So .70 60 .50 40 Do D2 3 4 5 6 7 Quantity of Francs (Milions) Refer to Figure 14.1. Suppose that the United States increases its imports from Switzerland, resulting in a rise in the demand for francs from Do to D1. Under a floating exchange rate system, the new equilibrium exchange rate would be: Select one: а. $0.40 per franc b. $0.50 per franc С. $0.60 per franc d. $0.70 per francAssume that American rice sells for $100 per Japanese rose sell for 1600 yen per bushel and norminal exchange rate is 80 yen per dollar . Explain how you would make a profit from this situation what would be your profit per bushel of rice .A change in the euro-dollar exchange rate from $1 per epro to $2 per euro would price of German goods, the number of German goods that would be demanded in the U.S. the U.S. O decrease; reducing. O decrease; increasing. O increase; reducing. O increase; increasing.
- What is the difference between depreciation and devaluation? O There is no difference. O Depreciation refers to a fixed exchange rate, while devaluation refers to a floating exchange rate. O Depreciation refers to a floating exchange rate, while devaluation refers to a fixed exchange rate.Which of the following statement is incorrect? O Most of the answers are correct. O Diversifying investments across several countries often reduces risk. The absolute purchasing power parity theory posits that exchange rates are determined by the differences in the prices of a given market basket of traded goods and services when there are no trade barriers. O An exchange rate of two currencies found by using a common third currency is known as an interest rate. O Exchange rates can be expressed as the number of units of the domestic currency per one unit of the foreign currency.1 Suppose that two countries, Indonesia and Vietnam, produce coffee. The currency unit used in Indonesia is the Rupiah (IDR). The currency unit used in Vietnam is the Dong (VND). In Vietnam, coffee sells for 4,500 dong (VND) per pound. The exchange rate is 1.57 VND per 1 IDR, EVND/IDR = 1.57. 2 If the law of one price holds, what is the price of coffee in Indonesia, measured in Rupiah (assume we are talking about the same type of coffee)? Please round your answer to the nearest whole number. Assume the price of coffee in Indonesia is actually 3000 IDR per pound. Compute the relative price of coffee in Indonesia versus Vietnam (round your answer to 2 decimal places). Where will coffee traders buy coffee? Where will they sell coffee in this case? How will these transactions affect the price of coffee in Vietnam? In Indonesia?
- 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.A can of soda costs $1.25 in the United States and25 pesos in Mexico. What is the peso–dollar exchangerate (measured in pesos per dollar) if purchasingpower parity holds? If a monetary expansion causesall prices in Mexico to double, so that a soda nowcosts 50 pesos, what happens to the peso–dollarexchange rate?Suppose that a firm is considering opening a plant on the moon, and the current exchange rate is 1,280 moon pieces (mp) per dollar. Also, the wage rate is 22,800 mp per hour. Suppose further that Question Viewer an produce 240 units per hour, while workers on the moon are expected to be able to produce 380 units per hour (the lower gravity level helps them work faster). a. The moon wage rate without considering productiviy is $ /hr (round your response to the nearest penny). b. The moon "relative" wage rate considering productivity is $/hr (round your response to the nearest penny). c. Suppose that the U.S. wage rate is $23.50 per hour. If the U.S. managers want to become the location of choice for production, and if they cannot lower their wage rate due to labor union agreements, what does the labor productivity in the U.S. need to become? The labor produtivity in the U.S. needs to be at least units/hr (round your response to one decimal place).
- Consider the following table. A Big Mac in the US cost USD5.66 in January 2021. Given the cost of Big Mac and corresponding exchange rates of the countries below, compute for the implied PPP exchange rate, and indicate whether the country's domestic currency is overvalued or undervalued vis-à-vis the USD. Country Norway South Korea Switzerland Taiwan Vietnam Local cost of Big Mac 52 Nkr 4,500 won 6.50 SFr 72 NT$ 66,000 dong Exchange rate (local cur- rency/USD) 8.54 1,097.35 0.89 27.98 23,064 PPP exchange rate (local cur- rency/USD) Overvalued or undervalued? Overvalued or undervalued by how much (%)?The graph shows the supply curve of Canadian dollars. Draw a new supply curve that shows the effect of a rise in the expected future exchange rate. Label it. A change in the expected future exchange rate changes the supply of Canadian dollars________, and a change in Canadian demand for imports changes the supply of Canadian dollars O A. today; today B. in the future; today C. today; in the future D. in the future; in the future 120 MacBook Pro 110 100- 90- 80- 70- Exchange rate (Canadian cents per Canadian dollar) Click the graph, choose a tool in the palette and follow the instructions to create your graph. So 70 80 90 100 10 20 30 40 50 60 Quantity (billions of Canadian dollars per day) >>> Draw only the objects specified in the question.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
