Question 1

Which of the following could be a consequence of a depreciation of the U.S.real exchange rate?

Accepted Answer

The answer of Which of the following could be a...

Question 2

Imagine the real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S.gasoline,a gallon of U.S.gasoline costs $2.50 U.S.,and a gallon of Canadian gas costs $6 Canadian.What is the nominal exchange rate?

Accepted Answer

The real exchange rate is the ratio of prices between two countries, in this case, the price of gasoline in Canada relative to the price of gasoline in the United States. The real exchange rate is 1/2 gallon of Canadian gasoline per gallon of U.S. gasoline, which means that Canadian gasoline is twice as expensive as U.S. gasoline. To find the nominal exchange rate, we need to convert the price of Canadian gasoline into U.S. dollars. Since one U.S. gallon costs $2.50 U.S. and we need to buy two Canadian gallons to get the same amount of gasoline, the cost of one gallon of Canadian gasoline in U.S. dollars is:

2 x $6 Canadian / (1/2 x 1 U.S. gallon) = $24 U.S.

Therefore, the nominal exchange rate is:

$24 Canadian per U.S. dollar = 1/24 U.S. dollars per Canadian dollar = 1.20 Canadian dollars per U.S. dollar.

Question 3

In the U.S.a candy bar costs 50 cents.The nominal exchange rate is 6 Chinese yuan per dollar.If the real exchange rate is .60,what is the price of a candy bar in China?

Accepted Answer

The answer of In the U.S.a candy bar costs 50...

Question 4

The nominal exchange rate is about 1.8 Aruban florin per dollar.If a basket of goods in the United States costs $40,how many florins must a basket of goods in Aruba cost for purchasing power parity to hold?

Accepted Answer

To ensure purchasing power parity, the cost of a basket of goods in both countries should be equal when converted using the exchange rate. Therefore, we need to convert $40 into Aruban florins. 
$40 x 1.8 Aruban florin per dollar = 72 florin 
So a basket of goods in Aruba must cost 72 florin for purchasing power parity to hold. Therefore, the answer is C) 72 florin.

Question 5

Suppose that the real exchange rate between the United States and Kenya is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Kenyan goods a basket of U.S.goods buys)?

Accepted Answer

The answer of Suppose that the real exchange rate between...

Question 6

If it took as many dollars to buy goods in the United States as it did to buy enough Romanian currency to buy the same goods in Romania,the real exchange rate would be computed as how many Romanian goods per U.S.goods?

Accepted Answer

The real exchange rate being one implies that the purchasing power parity holds, meaning the same amount of money can buy the same quantity of goods in both countries.

Question 7

If US goods cost one dollar for each euro German goods costs,the real exchange rate would be computed as how many German goods per U.S.goods?

Accepted Answer

The answer of If US goods cost one dollar for...

Question 8

Suppose that the real exchange rate between the United States and Vietnam is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Vietnamese goods a basket of U.S.goods buys)?

Accepted Answer

The answer of Suppose that the real exchange rate between...

Question 9

The nominal exchange rate is 4 Saudi Arabian riyals,9 Moroccan dirham,45 Indian rupee,or .6 British pounds per U.S.dollar.A double latte espresso and a cinnamon biscotti costs $6 in the U.S.,24 riyals in Saudi Arabia,45 Moroccan dirham in Morocco,250 Indian rupees in India,and 5 British pounds in Britain.According to these numbers,where is the real exchange rate between American and foreign goods the lowest?

Accepted Answer

The answer of The nominal exchange rate is 4 Saudi...

Question 10

An appreciation of the U.S.real exchange rate induces U.S.consumers to buy

Accepted Answer

When the real exchange rate appreciates, it means that the purchasing power of domestic consumers has increased relative to foreign consumers. This leads to a decrease in demand for domestic goods (as they become more expensive) and an increase in demand for foreign goods (as they become relatively cheaper). Therefore, U.S. consumers will buy fewer domestic goods and more foreign goods.

Question 11

Suppose that the real exchange rate between the United States and Zambia is defined in terms of baskets of goods.Other things the same,which of the following will increase the real exchange rate (that is increase the number of baskets of Zambian goods a basket of U.S.goods buys)?

Accepted Answer

A decrease in the price of Zambian goods in Zambian Kwacha will increase the purchasing power of a dollar in terms of Zambian goods, therefore increasing the real exchange rate. Option A would decrease the purchasing power of a dollar in terms of Zambian goods, decreasing the real exchange rate. Option B would affect the relative price between U.S. and Zambian goods, but would not directly affect the real exchange rate. Option D is incorrect as option C is correct.

Question 12

An MP3 player in Singapore costs 200 Singaporean dollars.In the U.S.it costs 100 US dollars.Which of the following is correct?

Accepted Answer

The answer of An MP3 player in Singapore costs 200...

Question 13

If US goods cost 1/5 of one dollar for every Markka Finnish goods cost,the real exchange rate would be computed as how many Finnish goods per U.S.goods?

Accepted Answer

The answer of If US goods cost 1/5 of one...

Question 14

A depreciation of the U.S.real exchange rate induces U.S.consumers to buy

Accepted Answer

A depreciation of the U.S. real exchange rate makes foreign goods more expensive relative to domestic goods, leading U.S. consumers to buy more domestic goods and fewer foreign goods.

Question 15

A paperback book in the U.S.costs $6.In Chile it costs 4 pesos.If the nominal exchange rate is 1/2 peso per dollar,what is the real exchange rate?

Accepted Answer

The answer of A paperback book in the U.S.costs $6.In...

Question 16

In Ireland,a pint of beer costs 2.2 Irish pounds.In Australia,a pint of beer costs 4 Australian dollars.If the exchange rate is .5 pounds per Australian dollar,what is the real exchange rate?

Accepted Answer

The answer of In Ireland,a pint of beer costs 2.2...

Question 17

The nominal exchange rate is 2 Thai bhat for one U.S.dollar.A sub sandwich combo deal in the U.S.costs $6 dollars in the U.S.and 8 bhat in Thailand.The real exchange rate is

Accepted Answer

The answer of The nominal exchange rate is 2 Thai...

Question 18

Suppose the real exchange rate is 4/5 pounds of Chilean beef per pound of U.S.beef,a pound of U.S.beef costs $2 and the nominal exchange rate is 600 Chilean pesos per dollar.It follows that Chilean beef costs

Accepted Answer

To find the price of Chilean beef, we need to convert the price of U.S. beef to pesos using the nominal exchange rate, and then multiply by the real exchange rate.

1 pound of U.S. beef costs $2, which is equivalent to 2 x 600 = 1200 Chilean pesos.

So, the price of Chilean beef per pound is:

(4/5) x 1200 = 960 pesos per pound of Chilean beef

Therefore, the correct answer is (C), 1,500 pesos per pound.

Question 19

If it took as many dollars to buy goods in the United States as it did to buy enough currency to buy the same goods in India,the real exchange rate would be computed as how many Indian goods per U.S.goods?

Accepted Answer

The answer of If it took as many dollars to...

Question 20

Imagine that a bushel of wheat costs $3.20 in the United States and costs 20 pesos in Mexico.If the nominal exchange rate is 10 pesos per dollar,the real exchange rate is

Accepted Answer

The real exchange rate is calculated by dividing the nominal exchange rate by the ratio of foreign price to domestic price.

Real exchange rate = nominal exchange rate x (foreign price / domestic price)

In this case,

Real exchange rate = 10 pesos per dollar x (20 pesos / $3.20)

Real exchange rate = 10 x 6.25

Real exchange rate = 62.5

Therefore, the real exchange rate is 1 / 62.5 or 0.016 or 1.60.

Hence, the best choice is A) 1.60.

Quiz 31: Open-Economy Macroeconomics: Basic Concepts