Suppose the average price of a Big Mac in the United States is $3.50 while in Japan the average price is 400 yen. If the market exchange rate is that 1 dollar is exchanged for 100 yen, the purchasing power parity model of exchange rate determination suggests that: a. the yen is overvalued. b. the yen value is about correct. C. the price of a Big Mac in Japan will rise. d. the dollar will depreciate against the yen.
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- Suppose the average price of a Big Mac in the United States is $3.50 while in Japan the average price is 400 yen. If the market exchange rate is that 1 dollar is exchanged for 100 yen, the purchasing power parity model of exchange rate determination suggests that: a. The yen is overvalued. b. The yen is undervalued. c. The price of a Big Mac in Japan will rise. d. The dollar will depreciate against the yen.If there is a decrease in the desire of foreigners to purchase goods and services from the United States and a lower desire to invest in U.S. banks and businesses, then how would this affect the U.S. foreign exchange market? A. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would depreciate. B. The equilibrium quantity of foreign currency would decrease and the U.S. dollar would appreciate. C. The equilibrium quantity of foreign currency would increase and the U.S. dollar would depreciate. D. The equilibrium quantity of foreign currency would increase and the U.S. dollar would appreciate.a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200 import good from Britain? d. How do these changes affect the economic welfare of U.S. exporters and U.S. importers? 2. a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.72 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200…
- In 1990, the price level for the United States was 100, the price level for Pugelovia was also 100, and in the foreign exchange market one Pugelovian pnut (pronounced “p’noot”) was equal to $1. In 2013, the U.S. price level had risen to 260, and the Pugelovian price level had risen to 390. a. According to PPP, what should the dollar–pnut exchange rate be in 2013? b. If the actual dollar–pnut exchange rate is $1/pnut in 2013, is the pnut overvalued or undervalued relative to PPP?1 Suppose that two countries, Indonesia and Vietnam, produce coffee. The currency unit used in Indonesia is the Rupiah (IDR). The currency unit used in Vietnam is the Dong (VND). In Vietnam, coffee sells for 4,500 dong (VND) per pound. The exchange rate is 1.57 VND per 1 IDR, EVND/IDR = 1.57. 2 If the law of one price holds, what is the price of coffee in Indonesia, measured in Rupiah (assume we are talking about the same type of coffee)? Please round your answer to the nearest whole number. Assume the price of coffee in Indonesia is actually 3000 IDR per pound. Compute the relative price of coffee in Indonesia versus Vietnam (round your answer to 2 decimal places). Where will coffee traders buy coffee? Where will they sell coffee in this case? How will these transactions affect the price of coffee in Vietnam? In Indonesia?Suppose that if you purchase a big Mac in Coral Springs, FL in the US, it will cost you $3.95. On the other hand, if you purchase the same big Mac in Florianopolis in southern Brazil, it will cost you 18.85 Brazilian real. The current exchange rate is $1 US buys 5.60 real. In this case, according to the law of one price, the exchange rate should be that $1 US buys time we predict that the US dollar should real, and hence, over ---- O 5.95; appreciate O 5.95; depreciate O 4.77; appreciate 4.77; depreciate
- Suppose that yesterday, the U.S. dollar-Japanese yen exchange rate was $1=¥0.553546. The price of one Japanese yen in terms of a U.S. dollar was ___ . Suppose that today the U.S. dollar-Japanese yen exchange rate falls to $1=¥0.533585 for one dollar. This means that between yesterday and today, the U.S. dollar has ___ against the Japanese yen. The price of a Mexican peso in terms of the U.S. dollar is now ___ .when the exchange rate for the British pound changes from $1.60 per pound to $1.40 per pound, then, holding everything else constant, the pound has __________, American wheat sold in Britain becomes _________ expensive, and British cars sold in the United States become __________ expensive. depreciated, less, less depreciated, more, less appreciated, more, less appreciated, more, more depreciated, more, more appreciated, less, more depreciated, less, moreSuppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 0.75 eurosper U.S. dollar and today the U.S. dollar is trading at 0.80 euros per U.S. dollar. Which of the twocurrencies (the U.S. dollar or the euro) has appreciated and which has depreciated today?b) Suppose that the exchange rate for the Mexican peso fell from 15 pesos per U.S. dollar to 10 pesosper U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan tobuy in the foreign exchange market?c) Suppose that the exchange rate rose from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What isthe effect of this change on the quantity of U.S. dollars that people plan to sell in the foreignexchange market?