
(a)
Identify the real exchange rate in terms of cars and net export of cars to Japan, if the nominal exchange rate is 100.
(a)

Explanation of Solution
The real exchange rate measures the relative
The real exchange rate of dollar is 0.8, which means the US car is cheaper in the economy.
The US car is priced as 20,000 dollar. If 1 dollar is equal to 100 Yen, then the US car’s cost can be found as follows:
If the US car’s cost is 2000,000 and Japanese car’s cost is 2,500,000 dollar, then the real exchange rate of Yen can be calculated as follows:
The real exchange rate of Yen is 0.8.
The US exports are based on the Japanese
Japanese demand on the US car is 8,000 cars.
The US demand on the Japanese car can be calculated as follows:
Japanese demand on the US car is 25,000 cars.
The net export of the US made car to Japan can be calculated as follows:
The net export of the US made car to Japan is -17,000 cars.
Nominal exchange rate: The nominal exchange rate is the number of domestic currency needed to purchase the number of foreign currency.
Real exchange rate: The real exchange rate measures the relative price of domestic goods to the foreign goods.
(b)
Identify the real exchange rate in terms of cars and net export of cars to japan if the nominal exchange rate is 125.
(b)

Explanation of Solution
If the nominal exchange rate is increased from $100 to $125, both the US and Japanese car cost $20,000. The real exchange rate of dollar means the relative price of US car with Japanese car can be calculated as follows.
The real exchange rate of dollar is 1. Which means the US car price equally to the Japanese made cars.
The US car priced 20,000 dollar. If 1 dollar is equal to 125 Yen. Then we can find the US car cost as follows.
If the US car and Japanese car cost is 2,500,000 dollar. The real exchange rate of Yen can be calculated as follows.
The real exchange rate of Yen is 1.this means relative to Japanese made car, US car price increased due to an appreciation of dollar.
The US exports are based on the Japanese demand for US cars. And US imports based on its demand on Japanese cars. Japanese demand on US car can be calculated as follows.
Japanese demand on US car is 7,500 cars.
US demand on Japanese car can be calculated as follows.
Japanese demand on US car is 26,000 cars.
The new net export of US made car to Japan can be calculated as follow.
The net export of US made car to Japan is -18,500 cars.
(c)
Effects of appreciation US dollar in net exports of automobiles.
(c)

Explanation of Solution
When US dollar appreciate, the US exports become expensive related to Japanese. And the US imports become cheaper. This will reduce the US exports to Japan and US imports more from Japanese. Because Japanese cars become cheaper to US.
Want to see more full solutions like this?
Chapter 17 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
- Not use ai pleasearrow_forwardHelp me write these economic analysis for Macys one paragraph) Company name/current state of operation of this company - Describe the company's performance in the present economy, whether it is growing or declining, and who are its competitors?arrow_forwardnot use ai pleasearrow_forward
- The following graph plots daily cost curves for a firm operating in the competitive market for sweatbands. Hint: Once you have positioned the rectangle on the graph, select a point to observe its coordinates. Profit or Loss0246810121416182050454035302520151050PRICE (Dollars per sweatband)QUANTITY (Thousands of sweatbands per day)MCATCAVC8, 30 In the short run, given a market price equal to $15 per sweatband, the firm should produce a daily quantity of sweatbands. On the preceding graph, use the blue rectangle (circle symbols) to fill in the area that represents profit or loss of the firm given the market price of $15 and the quantity of production from your previous answer. Note: In the following question, enter a positive number regardless of whether the firm earns a profit or incurs a loss. The rectangular area represents a short-run of thousand per day for the firm.arrow_forwardNot use ai pleasearrow_forwardSouth Africa faces the triple challenge of poverty, inequality and unemployment and the national minimum wage debate has pulled on all three threads to make arguments for and against this policy. Discuss the theoretical implications of a national minimum wage, and touching on each of the three challenges South Africa faces, discuss some arguments for how this policy may affect them.arrow_forward
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning





