Question 1

A quality men's suit in the U.S.costs $400.The same suit costs 300 British pounds in the U.K.The nominal exchange rate is .60 pounds per dollar.
A.Find the real exchange rate.Show your work.
B.In terms of dollars where is the suit cheaper?

Accepted Answer

The answer of A quality men's suit in the U.S.costs...

Question 2

Suppose a bottle of wine costs 20 euros in France and 25 dollars in the United States.If the exchange rate is .80 euros per dollar,what is the real exchange rate?

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The answer of Suppose a bottle of wine costs 20...

Question 3

A bushel of apples costs $15.00 in the U.S.The same apples cost 1,600 yen in Japan.If the exchange rate is 80 yen per dollar,is there a possibility for arbitrage? Explain and defend your answer.As part of your defense,find the real exchange rate.

Accepted Answer

The answer of A bushel of apples costs $15.00 in...

Question 4

The nominal exchange rate is 90 Pakistani rupees per dollar.The price of a shirt in Pakistan is 1800 rupees.The same shirt sells for $25 in the U.S.
A.What is the real exchange rate? Show your work.
B.Can arbitragers make a profit?
C.If your answer to C is yes,where would they buy and where would they sell?

Accepted Answer

The answer of The nominal exchange rate is 90 Pakistani...

Question 5

Why are net exports and net capital outflow always equal?

Accepted Answer

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Question 6

The price level in Country A is 250.The price level in Country B is 300.If purchasing-power parity holds,what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

Accepted Answer

The answer of The price level in Country A is...

Question 7

Over the last 5 years the amount of country A's currency it took to buy a unit of country B's currency more than doubled.
A.Did country A's currency depreciate or appreciate?
B.According to purchasing-power parity,what explains the change in the value of country B's currency?

Accepted Answer

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Question 8

Suppose that a country has $120 billion of national saving,and $80 billion of domestic investment.Is this possible? Where did the other $40 billion of national savings go?

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Question 9

Derive the relation between savings,domestic investment,and net capital outflow using the national income accounting identity.

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Question 10

A pair of hiking boots costs $120 in the U.S. ,if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar,what is the price of the same hiking boots in Brazil?
Show your work.

Accepted Answer

The answer of A pair of hiking boots costs $120...

Question 11

The nominal exchange rate is 3 Malaysian ringgits per dollar.The real exchange rate is 8/5.If a Big Mac costs 7.5 ringgits in Malaysia,how much does a Big Mac cost in the U.S.? Show your work.

Accepted Answer

The answer of The nominal exchange rate is 3 Malaysian...

Question 12

How do we find the real exchange rate from the nominal exchange rate?

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Question 13

Colonial America had little industry and so had mostly raw materials to export.At the same time,there were many opportunities to purchase capital goods and earn a high rate of return because there was little existing capital so that the marginal product of capital was relatively high.What does this suggest about net exports and net capital outflow in colonial America?

Accepted Answer

The answer of Colonial America had little industry and so...

Question 14

List the factors that might influence a country's exports,imports,and trade balance.

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Question 15

A pound of steak costs $10 in the U.S.and 56.25 riyals (the currency of Saudi Arabia)in Saudi Arabia.If the real exchange rate is 2/3,what is the nominal exchange rate? Show your work.

Accepted Answer

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Question 16

Assuming purchasing-power parity holds and that over a period of five years the dollar had appreciated relative to the currency of Country X,what would explain the appreciation of the dollar?

Accepted Answer

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Question 17

The nominal exchange rate is 32 Russian rubles per dollar.The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A.What is the real exchange rate? Show your work.
B.Can arbitragers make a profit?
C.If your answer to B is yes,where would arbitragers buy and where would they sell.

Accepted Answer

The answer of The nominal exchange rate is 32 Russian...

Question 18

How do the nominal exchange rate and the real exchange rate differ?

Accepted Answer

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Question 19

During 2011 the inflation rate in Brazil was about 6.6% while in the U.S.it was about 3.3%.At the start of 2011 the nominal exchange rate was about 1.7 Brazilian real per U.S.dollar.
If purchasing-power parity holds,about what should the nominal exchange rate have been at the end of 2011? Show your work.

Accepted Answer

The answer of During 2011 the inflation rate in Brazil...

Question 20

Suppose that Bill,a resident of the U.S. ,buys software from a company in Japan.Explain why and in what directions this changes U.S.net exports and U.S.net capital outflow.

Accepted Answer

The answer of Suppose that Bill,a resident of the U.S....

Quiz 18: Open Economy Macroeconomics Basic Concepts: Part A

A quality men's suit in the U.S.costs $400.The same suit costs 300 British pounds in the U.K.The nominal exchange rate is .60 pounds per dollar. A.Find the real exchange rate.Show your work. B.In terms of dollars where is the suit cheaper?