ECONOMICS-W/MYECONLAB
7th Edition
ISBN: 9780134833125
Author: Hubbard
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 29, Problem 29.2.5PA
To determine
The exchange rate between the dollar and euro.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
The euro is the official currency of almost all of the European Union as well as several smaller countries. It is the second-most traded currency in the world after the United States dollar. As of August 2018, with more than €1.2 trillion in circulation, the euro has one of the highest combined values of banknotes and coins in circulation in the world, having surpassed the U.S. dollar. By March 2002 it had completely replaced the former currencies of the European Union countries.
Do you think that a common currency for North America (the U.S., Canada and Mexico) would be a good idea? Would it help facilitate trade? Why?
The following table shows the number of U.S. dollars required to buy one euro between February 1, 2016, and September 1, 2016. Use this table to answer the following questions.
Date
U.S. Dollars Required to Buy 1 Euro
February 1, 2016
1.1092
March 1, 2016
1.1134
April 1, 2016
1.1346
May 1, 2016
1.1312
June 1, 2016
1.1232
July 1, 2016
1.1055
August 1, 2016
1.1207
September 1, 2016
1.1218
Between February 1, 2016, and September 1, 2016, the U.S. dollar ________ against the euro, and the euro ________ against the U.S. dollar.
depreciated; appreciated
appreciated; depreciated
neither appreciated nor depreciated; depreciated
depreciated; neither appreciated nor depreciated
appreciated; neither appreciated nor depreciated
A country with higher nominal interest rates than its trading partners will see its exchange rate depreciate in value relative to the currencies of its trading partners in the long run.
Is this statement true or false?
Briefly explain why.
Chapter 29 Solutions
ECONOMICS-W/MYECONLAB
Ch. 29 - Prob. 29.1.1RQCh. 29 - Prob. 29.1.2RQCh. 29 - Prob. 29.1.3RQCh. 29 - Prob. 29.1.4PACh. 29 - Prob. 29.1.5PACh. 29 - Prob. 29.1.6PACh. 29 - Prob. 29.1.7PACh. 29 - Prob. 29.1.8PACh. 29 - Prob. 29.1.9PACh. 29 - Prob. 29.1.10PA
Ch. 29 - Prob. 29.1.11PACh. 29 - Prob. 29.2.1RQCh. 29 - Prob. 29.2.2RQCh. 29 - Prob. 29.2.3RQCh. 29 - Prob. 29.2.4RQCh. 29 - Prob. 29.2.5PACh. 29 - Prob. 29.2.6PACh. 29 - Prob. 29.2.7PACh. 29 - Prob. 29.2.8PACh. 29 - Prob. 29.2.9PACh. 29 - Prob. 29.2.11PACh. 29 - Prob. 29.2.12PACh. 29 - Prob. 29.2.13PACh. 29 - Prob. 29.2.14PACh. 29 - Prob. 29.3.1RQCh. 29 - Prob. 29.3.2RQCh. 29 - Prob. 29.3.3RQCh. 29 - Prob. 29.3.4PACh. 29 - Prob. 29.3.5PACh. 29 - Prob. 29.3.6PACh. 29 - Prob. 29.3.7PACh. 29 - Prob. 29.3.9PACh. 29 - Prob. 29.3.10PACh. 29 - Prob. 29.4.2RQCh. 29 - Prob. 29.4.5PACh. 29 - Prob. 29.4.6PACh. 29 - Prob. 29.4.7PACh. 29 - Prob. 29.4.8PACh. 29 - Prob. 29.5.1RQCh. 29 - Prob. 29.5.2RQCh. 29 - Prob. 29.5.3RQCh. 29 - Prob. 29.5.4PACh. 29 - Prob. 29.5.5PACh. 29 - Prob. 29.5.6PACh. 29 - Prob. 29.5.7PACh. 29 - Prob. 29.1RDECh. 29 - Prob. 29.2RDECh. 29 - Prob. 29.3RDECh. 29 - Prob. 29.4RDECh. 29 - Prob. 29.5RDECh. 29 - Prob. 29.1CTE
Knowledge Booster
Similar questions
- Visit one of the many websites that lists all of the current exchange rates between different currencies around the world. Try a financial newspaper’s site such as ft.com (follow the links to “Market Data,” and then “Currencies”), or try websites devoted to foreign exchange market data such as oanda.com or xe.com (dig down; don’t just look at the major currency tables). According to these lists, how many distinct currencies exist around the world today? Are some currencies used in more than one country?arrow_forwardSuppose that you hold a piece of land in the city of London that you may want to sell in one year. As a U.S. resident, you are concerned with the dollar value of the land. Assume that if the British economy booms in the future, the land will be worth £2,000, and one British pound will be worth $1.50. If the British economy slows down, on the other hand, the land will be worth less, say, £1,500, but the pound will be stronger, say, $1.60 per pound. You feel that the British economy will experience a boom with a 60 percent probability and a slowdown with a 40 percent probability. Required: Estimate your exposure (b) to the exchange risk. Note: Negative amount should be indicated by a minus sign. Compute the variance of the dollar value of your property that is attributable to exchange rate uncertainty.arrow_forwardInterest Rates Why do interest rates vary among countries? Why are interest rates normally similar for those European countries that use the euro as their currency? Offer a reason why the government interest rate of one country could be slightly higher than the government interest rate of another country, even though the euro is the currency used in both countries.arrow_forward
- What are some of the main reasons not all countries in the EU have adopted the Euro?arrow_forwardBriefly describe the current international monetarysystem. How does the current system differ fromthe system that was in place prior to August 1971?arrow_forwardThe difference between the amount we spend to import products from other countries and the amount we make when we export products to other countries is called the balance of trade. Why would the balance of trade affect the value of the US dollar? Is it better to import more or to export more? Why?arrow_forward
- (a) Recently, a government official in Europe stated that the European Central Bank needs to weaken the euro so as to improve the European economy. Explains the logic behind this recommendation, and state whether you believe the strategy would be successful.arrow_forwardWhat countries currently use the EURO?arrow_forwardwhy is that currency exchange are measured in dollars?arrow_forward
- Consider the following extract and answer the questions that follow. El Salvador Becomes the First Country To Adopt Bitcoin As Official Currency After the COVID-19 pandemic, the few remaining limitations to the digital world seem to have disappeared, including the conquest of cryptocurrencies. The definitive step seems to have been El Salvador's decision to transform Bitcoin into the official currency, being the first country in the world to do so. However, as evolved as President Nayib Bukele's decision seemed to be, the reality of bringing the heaviest digital currency into the real world seems destined for chaos. In announcing his move, Bukele claimed that the digital currency would help Salvadorans save an estimated "$400 million," which the government estimates is spent annually on remittance fees, NBC News explained. The government made the Chivo digital wallet available to citizens, claiming it would be available on the App Store and Google Play shortly before noon local time on…arrow_forward2. The following table contains data for a hypothetical closed economy that uses the dollar as its currency.arrow_forwardWhat would make a country decide to changefrom a common currency, like the euro, back to its own currency?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax