EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 39, Problem 6DQ
To determine
The benefit and loss from exchange rates.
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Suppose that a Big Mac in the US costs $3.15 and 2.99 Bolivianos in Bolivia. The currency exchange
rate is $1 US buys 6.54 Bolivianos. According to the law of one price, the exchange rate should be
$1 US buys Bolivianos and so, over time, the US dollar should
O 0.95; appreciate
O 0.95; depreciate
9.49; appreciate
9.49; depreciate
Suppose the Australian dollar floats against the US dollar and the demand for Australian dollars in
the foreign exchange market is given by Q = 100 - 50E where Q denotes the quantity of AUD
and E denotes the nominal exchange rate expressed in USD per AUD. The supply of Australian
dollars is given by Q = 20 + 50E. What is the equilibrium nominal exchange rate?
O 0.80
O 1.00
O 1.20
O 1.50
Say that in Miami, in Coral Gables, a big mac cost $4.25 and a large fries cost $2.50. In Japan, the total cost of a big mac and
large fries is 81 Yen. The according to purchasing power parity, the exchange rate that equalizes purchasing power of this
basket of goods is
8.5
О 12
O 6.5
O 10
Chapter 39 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
Ch. 39.1 - Prob. 1QQCh. 39.1 - Prob. 2QQCh. 39.1 - Prob. 3QQCh. 39.1 - Prob. 4QQCh. 39 - Prob. 1DQCh. 39 - Prob. 2DQCh. 39 - Prob. 3DQCh. 39 - Prob. 4DQCh. 39 - Prob. 5DQCh. 39 - Prob. 6DQ
Ch. 39 - Prob. 7DQCh. 39 - Prob. 8DQCh. 39 - Prob. 9DQCh. 39 - Prob. 10DQCh. 39 - Prob. 11DQCh. 39 - Prob. 1RQCh. 39 - Prob. 2RQCh. 39 - Prob. 3RQCh. 39 - Prob. 4RQCh. 39 - Prob. 5RQCh. 39 - Prob. 6RQCh. 39 - Prob. 7RQCh. 39 - Prob. 8RQCh. 39 - Prob. 9RQCh. 39 - Prob. 10RQCh. 39 - Prob. 1PCh. 39 - Prob. 2PCh. 39 - Prob. 3PCh. 39 - Prob. 4PCh. 39 - Prob. 5P
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- 27 Suppose that the current Canadian dollar (CAD) to U.S. dollar exchange rate is $0.85 CAD = $1 U.S. and that the U.S. dollar price of an Apple iPhone is $300. What is the Canadian dollar price of an iPhone? 2$ CAD Next, suppose that the CAD to U.S. dollar exchange rate moves to $0.96 CAD = $1 U.S. What is the new Canadian dollar price of an iPhone? 2$ CAD Other things equal, would you expect Canada to import more or fewer iPhones at the new exchange rate? V (Click to select) More Fewerarrow_forwardPurchasing power parity theory would suggest that if the Canadian price of a basket of goods is C$1,800, but the same basket in the United States is U.S.$1,300, and the actual exchange rate is C$1.30 = U.S.S1.00, then the value of the Canadian dollar should O A. depreciate by approximately 8.9 percent. O B. depreciate by approximately 6.2 percent. OC. appreciate by approximately 8.9 percent. O D. appreciate by approximately 6.2 percent. O E. remain unchanged.arrow_forwardQUESTION 25 At Bank A, the yen-dollar exchange rate is JPY120/USD. At Bank B, the dollar-euro exchange rate is USD1/EUR. At Bank C, the yen-euro exchange rate is: JPY123/EUR. What is the net profit if a dealer starts with USD1,000,000? The dealer cannot make a profit. O $24,390 O $25,000 None of the answers is correct.arrow_forward
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