MANKIW: PRINCIPLES OF MACROECONOMICS
8th Edition
ISBN: 9781337801782
Author: Mankiw
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 8PA
(a):
To determine
Computation of predicted exchange rate.
Sub part(b)
To determine
Computation of predicted exchange rate.
(c)
To determine
Relevance of exchange rate.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A case study in the chapter analyzed purchasing-power parity for several countries using the price of Big Macs. Here are data for a few more
countries:
Price of a Big Mac
Predicted Exchange Rate
11,900 pesos
For each country, select the predicted exchange rate of the local currency per U.S. dollar. (Hint: Recall that the U.S. price of a Big Mac was $5.5
Country
Colombia
Actual Exchange Rate
3,192 pesos/$
Sri Lanka
580 rupees
Russia
110 rubles
182 rupees/$
67 rubles/$
Saudi Arabia
France
12 riyals
4.05 €
3.75 riyals/$
0.87 €/$
According to purchasing-power parity, the predicted exchange rate between the Sri Lankan rupee and the euro is
actual exchange rate is
rupees per euro.
rupees per euro. However, th
How would I find the actual exchange rate to answer the bottom part of the data shown.
A case study in the chapter analyzed purchasing-power parity for several countries using the price of Big Macs. Here are data for a few more
countries:
For each country, select the predicted exchange rate of the local currency per U.S. dollar. (Hint: Recall that the U.S. price of a Big Mac was $4.93.)
Price of a Big Mac Predicted Exchange Rate
Actual Exchange Rate
Country
Chile
2,100 pesos
715 pesos/$
900 forints
293 forints/$
75 korunas
25.1 korunas/$
13.5 real
4.02 real/$
5.84 C$
1.41 C$/$
Hungary
Czech Republic
Brazil
Canada
According to purchasing-power parity, the predicted exchange rate between the Hungarian forint and the Canadian dollar is
dollar. However, the actual exchange rate is forints per Canadian dollar.
forints per Canadian
Chapter 18 Solutions
MANKIW: PRINCIPLES OF MACROECONOMICS
Knowledge Booster
Similar questions
- Given the definition of the exchange rate , if the Canadian dollar is the domestic currency and US dollar the foreign currency, what does a nominal exchange rate of 1.15 means?arrow_forwardIf a "Big Mac costs $4.00 in the United States and 200 yen in Japan, then the implied "purchasing-power-parity" exchange rate using the "Big Mac" is __________. If the actual exchange rate in the market is 120 yen = $1, then an economist would say that the actual Japanese yen is __________ in comparison with its "purchasing-power-parity" rate.arrow_forwardplease do this for the country China.arrow_forward
- 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 ___ .arrow_forwardThe euro/dollar exchange rate is 1 euro = $1.20. According to the law of one price, a camera that sells for $240 in New York should sell for how many euros in Germany?arrow_forwardnot use ai pleasearrow_forward
- We look at the trade of gas between Russia and the EU and assumes that both areas' supply curves slope upwards and their demand curves slope downwards in the diagram with quantity on the horizontal axis and price on the vertical axis. To make the situation simple, we also initially assume that the exchange rate is constant, and it is 1 (so that we do not need to differentiate between the prices i Russia and the EU). In the autarky equilibria, prices are higher in the EU than in Russia. Unless otherwise specified, there are no trading costs, and the capacity of the pipelines is not binding (ie with free trade the prices are basically the same in the EU and Russia). (a) Draw and show the supply of export goods and the demand for import goods in relation to the two areas' supply and demand curves (three islands next to each other). (b) What happens (to welfare in the two countries and consumer surplus/producer surplus) if the EU stops importing Russian gas? (c) Without Nord Stream 1/2 in…arrow_forwardOther things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, what happen to U.S. dollar and U.S. goods?arrow_forwardThe equation for purchasing power parity is – the domestic price should equal the exchange rate multiplied by the foreign price. Suppose your shirt sells for 10 euros in Europe. If purchasing power parity holds, what should be the price of that same shirt in the United States if it takes 1.145 dollars to get one euro?arrow_forward
- Suppose that the US interest rate is 5.4% per annum and the interest rate in Japan is 2.8% per annum. The value of the US dollar in the spot market is ¥74 what must the forward exchange rate be (yen per US dollar) for There to be no risk less profit? (Enter the numerical value only rounding to one decimal place) The forward rate you calculate above will be different and different from the spot rate explain why it cannot be the samearrow_forwardSuppose the dollar/franc exchange rate equals $0.50 per franc. According to the Purchasing Power-Parity theory, what will happen to the dollar’s exchange value under each of the following circumstances? a. The U.S. price level increases by 10 percent and the price level in Switzerland stays constant. b. The U.S. price level increases by 10 percent and the price level in Switzerland increases by 20 percent. c. The U.S. price level decreases by 10 percent and the price level in Switzerland increases by 5 percent. d. The U.S. price level decreases by 10 percent and the price level in Switzerland decreases by 15 percent.arrow_forwardWe noted that in 1900, the fixed exchange rate between the British pound and the U.S. dollar was 1 pound equals $5. What is the exchange rate today? Whose currency has gained the most in purchasing power? What caused this dramatic change in the exchange rate?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage LearningExploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc