EBK BRIEF PRINCIPLES OF MACROECONOMICS
7th Edition
ISBN: 9780100469884
Author: Mankiw
Publisher: YUZU
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Question
Chapter 13, Problem 8PA
Sub part (a)
To determine
Profit per bushel of rice.
Sub part (b)
To determine
Effect on the real exchange rate.
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In our pretend world there are two countries - Chile and Switzerland - that are engaged in trade. The firm Switzerland
Chocolates Express sells Boxes of chocolate (a good) in Chile. Each Box of Chocolates sells for 6500 Chilean pesos in
Chile. In Switzerland, each box of chocolates 11 Swiss Franc to produce. Assume that the firm has 1 million boxes of
chocolate to sell. How much money (in Swiss Franc) would the firm make (or lose) on the sale at the following exchange
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Rate 1: 550 Pesos per Swiss Franc
Rate 2: 0.0015 Swiss Franc Per Chilean Peso
a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated?
b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above?
c. What happens to the $-price that U.S. residents pay for a ₤1200 import good from Britain?
d. How do these changes affect the economic welfare of U.S. exporters and U.S. importers?
2. a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.72 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated?
b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above?
c. What happens to the $-price that U.S. residents pay for a ₤1200…
If the two countries were both to benefit from trade, what's the possible range of the exchange rate, expressed in units of wine per unit of bread? Explain briefly.
Chapter 13 Solutions
EBK BRIEF PRINCIPLES OF MACROECONOMICS
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