Pegged Currency and International Trade Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to the U.S. dollar. Last month, one HK $ = 0.25 singapore dollar. Today, one HK$ = 0.30 singapore dollar. Assume that much trade in the computer industry occurs among singapore, Hong Kong, and the United States, and that all products are viewed as substitutes for each other and are of about the same quality. Assume that the firms invoice their products in their local currency and do not change their prices. Will the computer exports from the United States to Hong Kong increase, decrease, or remain the same? Briefly explain. Will the computer exports from singapore to the United States increase, decrease, or remain the same? Briefly explain.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 6, Problem 23QA
Textbook Problem

Pegged Currency and International Trade Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to the U.S. dollar. Last month, one HK $ = 0.25 singapore dollar. Today, one HK$ = 0.30 singapore dollar. Assume that much trade in the computer industry occurs among singapore, Hong Kong, and the United States, and that all products are viewed as substitutes for each other and are of about the same quality. Assume that the firms invoice their products in their local currency and do not change their prices.

  1. Will the computer exports from the United States to Hong Kong increase, decrease, or remain the same? Briefly explain.
  2. Will the computer exports from singapore to the United States increase, decrease, or remain the same? Briefly explain.

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