Question 1

While vacationing in Turkey you see a rug you consider purchasing. The seller tells you the rug costs 1,200 Turkish lire.
A. If the exchange rate is .60 lira per dollar, how many dollars does the rug cost?
B. If the dollar depreciates against the lira, will it take more or fewer dollars to buy the rug? Explain.

Accepted Answer

The answer of While vacationing in Turkey you see a...

Question 2

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

Accepted Answer

The answer of A bushel of apples costs $15.00 in...

Question 3

While on vacation in Europe you notice that a tablet computer is selling for 600 euros in France and for 533 pounds in Britain. You also know that the exchange rates are .75 euros per dollar and .65 British pounds per dollar. Where is the number of dollars you would pay for the tablet lower? How many dollars would you have to pay to buy it there?

Accepted Answer

The answer of While on vacation in Europe you notice...

Question 4

During 2011 the inflation rate in Brazil was about 6.6% while in the U.S. it was about 3.3%. At the start of 2011 the nominal exchange rate was about 1.7 Brazilian real per U.S. dollar.
If purchasing-power parity holds, about what should the nominal exchange rate have been at the end of 2011? Show your work.

Accepted Answer

The answer of During 2011 the inflation rate in Brazil...

Question 5

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

Accepted Answer

The answer of The nominal exchange rate is 3 Malaysian...

Question 6

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the cell phone cheaper?

Accepted Answer

The answer of A certain cell phone sells for 2400...

Question 7

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the television cheaper?

Accepted Answer

The answer of In the U.S. a delivery van costs...

Question 8

While on a study abroad program you see a McDonald's in Paris. A combo meal costs 8 euros. The same meal costs $6 in the U.S. and the exchange rate is .75 euros per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the combo meal cheaper?

Accepted Answer

The answer of While on a study abroad program you...

Question 9

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil?
Show your work.

Accepted Answer

The answer of A pair of hiking boots costs $120...

Question 10

The nominal exchange rate is 32 Russian rubles per dollar. The price of a bushel of wheat is 260 rubles in Russia and $7 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to B is yes, where would arbitragers buy and where would they sell.

Accepted Answer

The answer of The nominal exchange rate is 32 Russian...

Question 11

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

Accepted Answer

The answer of In the U.S. a box of tea...

Question 12

While vacationing in Agra, India, the price of one night's stay at your hotel room rises from 6600 rupees to 7200 rupees. If the exchange rate was previously 55 rupees per dollar, what would the exchange rate need to be now in order for the number of dollars you pay for your room to remain the same? Does this imply the rupee depreciated or appreciated against the dollar?

Accepted Answer

The answer of While vacationing in Agra, India, the price...

Question 13

A dozen eggs cost $2 in the U.S. and 12 pesos in Argentina. If the real exchange rate is 5/6, what is the nominal exchange rate? Show your work.

Accepted Answer

The answer of A dozen eggs cost $2 in the...

Question 14

In the U.S. a television costs $400. In South Africa the same television costs 3000 rand the currency of South Africa). The nominal exchange rate is 8 rand per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the television cheapest?

Accepted Answer

The answer of In the U.S. a television costs $400....

Question 15

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar.
A. Find the real exchange rate. Show your work.
B. In terms of dollars where is the suit cheaper?

Accepted Answer

The answer of A quality men's suit in the U.S....

Question 16

The nominal exchange rate is 90 Pakistani rupees per dollar. The price of a shirt in Pakistan is 1800 rupees. The same shirt sells for $25 in the U.S.
A. What is the real exchange rate? Show your work.
B. Can arbitragers make a profit?
C. If your answer to C is yes, where would they buy and where would they sell?

Accepted Answer

The answer of The nominal exchange rate is 90 Pakistani...

Question 17

A pound of steak costs $10 in the U.S. and 56.25 riyals the currency of Saudi Arabia) in Saudi Arabia. If the real exchange rate is 2/3, what is the nominal exchange rate? Show your work.

Accepted Answer

The answer of A pound of steak costs $10 in...

Question 18

The price level in Country A is 250. The price level in Country B is 300. If purchasing-power parity holds, what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.

Accepted Answer

The answer of The price level in Country A is...

Question 19

A farm equipment retailer in Azerbaijan exchanges Azerbaijan manats the currency of Azerbaijan) for $300,000 a bank in Azerbaijan was holding. It uses the $300,000 to buy farm equipment from a U.S. company. The U.S. company deposits half of these funds in a U.S. bank and exchanges the other half for euros from a bank in London.
As a result of these transactions, by how much, if at all, and in which direction did:
A. U.S. net exports change?
B. U.S. net capital outflow change?

Accepted Answer

The answer of A farm equipment retailer in Azerbaijan exchanges...

Question 20

While vacationing in Italy, you see an interesting meal on a menu. The price is 24 euros.
A. If the exchange rate is .80 euros per dollar, how many dollars would you have to give up to buy the meal?
B. If the dollar appreciated against the euro, but the price of the meal remained 24 euro, would the meal cost more or fewer dollars? Explain.

Accepted Answer

The answer of While vacationing in Italy, you see an...

Quiz 18: Open-Economy Macroeconomics: Basic Concepts

A bushel of apples costs $15.00 in the U.S. The same apples cost 1,600 yen in Japan. If the exchange rate is 80 yen per dollar, is there a possibility for arbitrage? Explain and defend your answer. As part of your defense, find the real exchange rate.

The nominal exchange rate is 3 Malaysian ringgits per dollar. The real exchange rate is 8/5. If a Big Mac costs 7.5 ringgits in Malaysia, how much does a Big Mac cost in the U.S.? Show your work.

A certain cell phone sells for 2400 yuan in China and for $300 in the U.S. The nominal exchange rate is 6.5 yuan per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the cell phone cheaper?

In the U.S. a delivery van costs $30,000. In Uruguay the same delivery van costs 720,000 pesos. The nominal exchange rate is 20 pesos per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheaper?

While on a study abroad program you see a McDonald's in Paris. A combo meal costs 8 euros. The same meal costs $6 in the U.S. and the exchange rate is .75 euros per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the combo meal cheaper?

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil? Show your work.

In the U.S. a box of tea costs $5. The same box of tea in Uganda costs 10,000 schillings the currency of Uganda). If the real exchange rate is 5/4, what is the nominal exchange rate? Show your work.

A dozen eggs cost $2 in the U.S. and 12 pesos in Argentina. If the real exchange rate is 5/6, what is the nominal exchange rate? Show your work.

In the U.S. a television costs $400. In South Africa the same television costs 3000 rand the currency of South Africa). The nominal exchange rate is 8 rand per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the television cheapest?

A quality men's suit in the U.S. costs $400. The same suit costs 300 British pounds in the U.K. The nominal exchange rate is .60 pounds per dollar. A. Find the real exchange rate. Show your work. B. In terms of dollars where is the suit cheaper?

A pound of steak costs $10 in the U.S. and 56.25 riyals the currency of Saudi Arabia) in Saudi Arabia. If the real exchange rate is 2/3, what is the nominal exchange rate? Show your work.

The price level in Country A is 250. The price level in Country B is 300. If purchasing-power parity holds, what is the nominal value of Country A's currency in the market for foreign exchange with Country B? Show your work.