PRINCIPLES OF ECONOMICS PKG >CUSTOM<
8th Edition
ISBN: 9781337699372
Author: Mankiw
Publisher: CENGAGE C
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Chapter 31, Problem 5CQQ
To determine
Exchange rate between Paris and New York.
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1 Suppose that two countries, Indonesia and Vietnam, produce coffee. The currency unit used in Indonesia is the Rupiah (IDR). The currency unit used in Vietnam is the Dong (VND). In Vietnam, coffee sells for 4,500 dong (VND) per pound. The exchange rate is 1.57 VND per 1 IDR, EVND/IDR = 1.57.
2 If the law of one price holds, what is the price of coffee in Indonesia, measured in Rupiah (assume we are talking about the same type of coffee)? Please round your answer to the nearest whole number.
Assume the price of coffee in Indonesia is actually 3000 IDR per pound. Compute the relative price of coffee in Indonesia versus Vietnam (round your answer to 2 decimal places). Where will coffee traders buy coffee? Where will they sell coffee in this case? How will these transactions affect the price of coffee in Vietnam? In Indonesia?
Given the definition of the exchange rate , if the Canadian dollar is the domestic currency and US dollar the foreign currency, what does a nominal exchange rate of 1.15 means?
Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, what happen to U.S. dollar and U.S. goods?
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PRINCIPLES OF ECONOMICS PKG >CUSTOM<
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