Problem 6 Corolla Exports and Pass-Through Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥2,150,000. The exchange rate is ¥87.60/$. The forecast rate of inflation in the United States is 2.2% per year and is 0.0% per year in Japan. Use this data to answer the following questions on exchange rate pass through.
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- Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥4,200,000. The exchange rate is ¥109.60/$. The forecast rate of inflation in the United States is 2.5% per year and is 1.5% per year in Japan. Use this data to answer the following questions on exchange rate passthrough. What was the export price for the Corolla at the beginning of the year expressed in the U.S. Dollars? Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? Assuming a 65% pass-through of the exchange rate, what will be the dollar price of a Corolla at the end of the year?Assume that the export price of a Sony Smartphone from Naguya, Japan is VIS. The exchange rate is 87.60S. The forecast rate of inflation in the United States is 22% per year and is 1,5% per year in Japan. Use this data to answer the following questions on exchange rate pass through. a. What was the export price for the Sony Smartphone at the begianing of the year expressed in U.S. dollars? b. Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? e. Assuming 100% pass-through of exehange rate, what will the dollar price of a Sony Smartphone be at the end of the year? nini d. Assuming 80% pass-through, what will the dollar price of a Sony Smartphone be at the end of the year?Today's spot rate of the Mexican peso os $0.10. Assume that purchasing power parity holds. The U.S. inflation rate over this year is expected to be 7 percent, whereas the Mexican inflation over this year is expected to be 3 percent. What will be the new value of the Mexican peso after it adjust to the inflationary changes? a. b. C. d. $0.10388 $0.15543 $0.17566 $0.37565
- makes it harder to compare lira amounts from different times. We use _ to adjust figures so that they can be compared. For example, in September 1998 1 USD was 0.21 liras. Today the exchange rate is 8.5 liras to 1 USD. Was the Turkish lira really that much more valuable in 1998 than it is now? (If you do the inflation correction you will see that the lira was indeed 15% more valuable against the US dollar back then as compared to its current value.) A) Economic growth, the real GDP B) the CPI, inflation C) Inflation, the CPI D) Unemployment, the GDP Deflator E) Changes in prices, inflationAssume that initially nominal exchange rate is E1=4 ($1 = ±4) and domestic (Turkey) inflation rate is TTR=10% percent while the US inflation rate is tUS*=0%. If %3D export value of Turkey equals ± 200 billion and it's import is $80 billion. Initially Turkey NX (net export) would display t billion deficit. If the nominal exchange rate increases suddenly from E1=4 to E2=5,5 while the price levels are still fixed (at the first step of J Curve) NX would be t billion deficit in short run. If the real exchange rate elasticity of export is 0,4 and real exchange rate elasticity of import is -0,4. NX would converge to t billion deficit in long run.Assume UK inflation rate falls relative to US inflation rate. Other things being equal, how should this affect the (a) UK demand for Dollars, (b) supply of Dollars for sale, and (c) equilibrium value of Dollars? (Indicate with a single graph). Which currency is going to appreciate in this regard?
- (b) Suppose the real exchange rate is 10, the domestic price level is 8, and the foreign price level is 4. (i) What is the nominal exchange rate? Use the expression: ereal= enor*P / Pfor where ereal is real exchange rate, enor is nominal exchange rate, P is domestic price level and Pfor is foreign price level. (ii) Suppose the real exchange rate rises by 10%, the inflation rate in the domestic country is 6%, and the inflation rate in the foreign country is 4%. By what percentage does the nominal exchange rate change?AE Ap Ap suggests that p where E is domestic price of one unit of foreign currency (e.g., Rs100 = $1) Q.23 Purchasing power parity which can be written as A. The home currency will appreciate if the current home inflation exceeds the current foreign inflation rate. B. The home currency will appreciate if the current foreign inflation rate exceeds the current domestic inflation rate. C. The home currency will depreciate if the current home interest rate exceeds the current Foreign interest rate D. The home currency will depreciate if the current home inflation rate exceeds the current foreign interest rate. E. Both B and D are correct.Over the last 10 years, the average rate of inflation has been 1.51%. What is the purchasing power of a dollar today in terms of what a peso could purchase in 2012?
- A South American country has had a high rate of inflation. Recently, its exchange rate was 15 cruzados per dollar; that is, one dollar will buy 15 cruzados. It is likely that the country will continue to experience a 25% inflation rate and that the U.S. will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many cruzados 5 years from now?A South American country has had a high rate of inflation. Recently, its exchange rate was 15 lunas per dollar. It is likely that the country will continue to experience a 25% inflation rate and that the US will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many lunas FIVE years from now? 39.40 lunas 30.14 lunas 45.78 lunas $42.56 lunasIn April 2016, the exchange rate for the Cog (the currency of Cogland) was 4,250 Cogs = £1. Inflation in the year to April 2017 was about 7% in Cogland and 2% in the United Kingdom. (a) If purchasing power parity held, what should have been the nominal exchange rate in April 2017? (b) The actual exchange rate in April 2017 was 5,750 Cogs = £1. What was the change in the real exchange rate?