The exchange rate between U.S. Dollar and Argentinian Peso is $1 = 125 Pesos. Inflation rate in USA is 8.6% and in Argentinal is 60.2%. In 2021, U.S. goods exports to Argentina were $7.7 billion; imports were $5.1 billion. The U.S. trade surplus with Argentina was $2.6 billion. Explain how the "inflation differential" between the two countries will affect trade. Will USA see an increase in trade surplus?

The exchange rate between U.S. Dollar and Argentinian Peso is $1 = 125 Pesos. Inflation rate in USA is 8.6% and in Argentinal is 60.2%. In 2021, U.S. goods exports to Argentina were $7.7 billion; imports were $5.1 billion. The U.S. trade surplus with Argentina was $2.6 billion. Explain how the "inflation differential" between the two countries will affect trade. Will USA see an increase in trade surplus?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter21: International Finance

Section: Chapter Questions

Problem 3QP

See similar textbooks

Similar questions

When Great Britain voted to leave the eurozone, the pound depreciated 17% against the dollar. It also raised fears that the eurozone, which uses the euro as a common currency, would fall apart. Suppose that the dollar is considered safer than the euro, given these conditions. The following graph shows the market for dollars, with the quantity of dollars measured along the horizontal axis and the price of dollars in terms of euros measured along the vertical axis (in other words, the euro/dollar exchange rate).
Japan and the United States are major trading partners and the exchange rate between the Japanese yen and the United States dollar is determined in a flexible foreign exchange market. (f) due to dollar's depraciation, will the Federal Reserve buy or sell yen in the foreign exchange market to stabilize the dollar/yen exchange rate? Explain.
Explain the impact on US export and import if the US dollar has depreciated in comparison with other currencies. For example, the exchange rate for the Canadian dollar was 1.36 per U.S dollar in 2003. Now in 2020, it is 1.31 Canadian dollars per U.S.dollar under this case the dollar has suffered a slight depreciation. Also, when the dollar has depreciated in the case of the Chinese Yuan from 8.27 in 2003 to 6.69 yuans in 2020 per U.S dollar. Also, when there is not either appreciation or depreciation from 2003 to 2020 which is the case of Saudi Arabia currency its exchange rate remains the same 3.75 Riyals per dollar since 2003. Then explain the impact of U.S. exports and imports under these scenarios.
The exchange rate is the price of one currency in terms of another currency. An exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table forecasts exchange rate data for May 21, 2018, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Foreign Currency Cost of One Unit of Foreign Currency (Dollars) Lithuanian litas (LTL) 0.3666 Canadian dollar (CAD) 0.8493 Euro (EUR) 1.3288 Mexican peso (MXN) 0.0889 United Kingdom pound (GBP) 1.8965 Suppose that on May 21, 2018, an ornamental bookcase handmade in the United Kingdom is priced at GBP 530. The approximate U.S. dollar price of the bookcase would be . If the exchange rate for the U.S. dollar–U.K. pound rises from $1.8965 to $2.2758 per U.K. pound, the U.S. dollar in value, or , relative to the U.K. pound.
The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for May 21, 2019, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Foreign Currency Cost of One Unit of Foreign Currency (Dollars) Brazilian real (BRL) 0.3666 Canadian dollar (CAD) 0.8493 Euro (EUR) 1.3288 Japanese yen (JPY) 0.009748 Mexican peso (MXN) 0.0889 United Kingdom pound (GBP) 1.8965 Suppose that on May 21, 2019, a marble statue handmade in Brazil is priced at BRL 2,750. The approximate U.S. dollar price of the statue would be . If the nominal exchange rate for the U.S. dollar–euro rises from $1.3288 to $1.52812 per euro, the euro in value, or , relative to the U.S. dollar.
An increase in U.S. imports from Mexico will cause the demand for pesos in the foreign exchange market to. 34.2
Suppose that the U.S. dollar-Chinese yuan exchange rate is fixed by the U.S. and Chinese governments. Assume also that labor is immobile between the United States and China due to high transportation costs. Which of the following situations is likely to occur if there is a simultaneous increase in the demand for U.S. goods and a decrease in the demand for Chinese goods? a) The Chinese unemployment rate will increase, and the country will undergo hard economic times for a sustained period. b) The U.S. unemployment rate will increase, and the country will undergo hard economic times for a sustained period. c) The Chinese unemployment rate will initially rise but then drop as the Chinese yuan depreciates against the U.S. dollar. d) The Chinese unemployment rate will initially rise but soon drop as unemployed Chinese move to the United States for employment.