MANAGERIAL ECONOMICS (LOOSELEAF)
5th Edition
ISBN: 9781337571371
Author: FROEB
Publisher: CENGAGE L
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Question
Chapter 11, Problem 2MC
To determine
Dollar value.
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Check out a sample textbook solutionStudents have asked these similar questions
You own a local company. In the past year, you successfully expanded your sales market into Europe, and you now have profits and
cash denominated in euros. You want to convert the euros to your home country currency to repatriate the profits and pay taxes. You are
a. not required to convert the euros to the home currency to pay taxes.
b. a demander of the euro in the foreign exchange market.
c. a supplier of your home country's currency in the foreign exchange market.
d. a demander of your home country's currency in the foreign exchange market.
1. The principal function of the foreign exchange
market is the transfer of funds, thus purchasing power,
from one nation and currency to another.
2. If it takes 116.57 yen to buy one dollar, it takes
$.0085785 to buy one yen.
3. Purchasing-power parity theory postulates that the
change in the exchange rate between two currencies is
proportional to the change in the ratio in the two
countries' general price levels.
4. The price-specie-flow adjustment mechanism
operates by the deficit nation losing gold and
experiencing a reduction in its money supply.
5. Monetary policy is very effective under a fixed
exchange rate policy.
True or Falae
GM produces and sells a compact car for $26,000. Volkswagen produces and sells a compact car for 19,000 euros. If the exchange rate is 1 dollar for 0.72 euros, which car would be the least expensive choice? Show your work.
Chapter 11 Solutions
MANAGERIAL ECONOMICS (LOOSELEAF)
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Similar questions
- Q1. Coffee beans are produced in Egypt and sold in many countries. In Egypt, a sack of beans sells for 12.95 Egyptian pounds. In the US, the beans sell for $6.99. Suppose that the exchange rate is $0.90 U.S. = £1.00 Egyptian. • How much would it cost in U.S. currency to buy the coffee in Egypt? How much would it cost in Egyptian currency to buy the beer in the U.S.? Is there an arbitrage opportunity? If there is an arbitrage opportunity, where would you buy and where would you sell? How much profit could you expect on a sack of beans?arrow_forwardTravis takes two trips to Ecuador. On his first trip, he finds that one US dollar is worth 25000 Ecuadorian Sucre. On his return trip, he finds that the dollar is now worth 24000 Ecuadorian Sucre. What is a likely result of this change in exchange rates?arrow_forwardIf the exchange rate moves from $1 for one Euro to $1.50 for one Euro, then Select one: a. it becomes more expensive for a European to buy a European product. b. it becomes more expensive for an American investor to save at an American bank. c. it becomes more expensive for an American to buy a Mexican product. d. it becomes more expensive for an American to buy a European product.arrow_forward
- Suppose a computer sells for US$1,200 in the U.S. and for £855 in London. If the exchange rate is £0.65 per dollar, is there any arbitrage (profit opportunity)? Explainarrow_forwardIn the foreign exchange market, how does a change in expected future U.S. exchange rate affect the demand for dollars?arrow_forward
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