ECON MICRO
5th Edition
ISBN: 9781337000536
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 20, Problem 4.5P
To determine
The various exchange rate regimes which were prevalent from gold standard regime.
Concept Introduction:
The method in which the currency of a country is regulated by its authority in accordance with other countries currencies and foreign exchange markets is known as Exchange rate regime. It is closely associated with the
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Consider the data in the table below:
Nominal Exchange Rates for the U.S. Dollar
yen
Foreign currency/0.5. U.S. dollars/foreign
Country
United Kingdom (pound)
Canada (Canadian dollar)
Mexico (peso)
Japan (yen)
European Union (euro)
a. Calculate the nominal exchange rate between the Mexican peso and the Japanese yen. Express in two ways.
Instructions: Enter your responses rounded to three decimal places.
One peso =
peso
dollar
0.612
0.968
11.654
81.126
0.698
peso.
currency
1.633
One yen
b. Suppose the peso appreciates by 20 percent against the dollar while the value of the yen against the dollar remains unchanged.
Instructions: Enter your responses rounded to three decimal places.
One peso
yen
One yen
1.033
0.086
0.012
1.433
On June 23, 2016, citizens of the United Kingdom voted in favor of a referendum to leave the European Union. The table below shows
the exchange rate between the U.S. dollar and the British pound 4 months before and 4 months after the vote. Complete the table,
giving all answers to three decimals.
Date
February 23, 2016
June 23, 2016
October, 23, 2016
Exchange Rates Between the U.S. Dollar and the British Pound
Units of foreign currency you can Number of U.S. dollars required to buy one
buy with 1 U.S. dollar
unit of the foreign currency
0.713
0.671
1.22
How much is the difference between the cross-exchange rates for Rupees (India) and Euro (europe) Show any calculations. Explain the reason for that difference.
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Similar questions
- Many developing countries, like Mexico, have moderate to high rates of inflation. At the same time, international trade plays an Important role In their economies. What type of exchange rate regime would be best for such a countrys currency vis ô vis the U.S. dollar?arrow_forwardWhat is the foreign exchange market?arrow_forwardWhy would a nation dollarize—that is, adopt another countrys currency instead of having its own?arrow_forward
- Euro area Norway United Kingdom Poland China Local Price: (Foreign currency) 4.08 42.00 3.29 10.80 21.00 Actual Exchange Rate (Dollars per unit of foreign currency) 1.12 0.12 1.25 0.26 0.14 PPP Exchange Rate (U.S. Dollars per British pound) Source: "The Big Mac Index, Our Interactive Currency Comparison Tool, The Economist, last modified January 10, 2019, accessed September 27, 2019, https://www.economist.com/news/2019/07/10/the-big-mac-index. - Dollar Price (Dollars) Purchasing-power parity (PPP) theory states that exchange rates would need to equalize the prices of goods in any two countries. For the dollar price of a Big Mac to be the same in both countries, a U.S. citizen would need to be able to convert $5.74 into exactly GBP 3.29. To find the exchange rate at which hamburger purchasing power is the same in both countries, divide the price in the United States by price in the United Kingdom: $5.76 GBP 3.29 $1.74 per pound 4.11 2.81 2.94 4.57 5.04 Exporting Big Macs from the Euro…arrow_forwardUsing the data calculate the balance on current account for this economy. The value of the current account is: $ Round your solution to the nearest whole number and be sure to include a negative sign if necessary. Current Account Exports of Goods Imports of Goods Balance of Trade Exports of Services Imports of Services Balance of Services Income Received on Investments Income Payments on Investments Net Income on Investments Net Transfers Value $900 1300 350 -300 200 -900 Balance - 400 50 - 700 -100arrow_forwardExchange rate topic: When the exchange rate changes, will the European divers on vacation overseas pay a different price for their scuba equipment rentals?arrow_forward
- Calculating Exchange Rates Assignment Directions: Use the information in Table 1 to answer questions 1-3. Table 1: How much does $1 (Le., sometimes abbreviated USD) buy in each of these currencies for the month of January and the month of March? Name of Country Exchange Rate Exchange Rate January March S1 = $1%= Polish Zloty 4.50 4.08 Mozambique Meticals 66.00 Albanian Lek 109.08 111.60 Australian Dollar 1.85 1.67 1. If you knew the price of an item such as a hamburger combo meal in Polish Zlotys, howwould you determine how many dollars you would need to buy it? Provide a possible equation below: Chow -ourarrow_forwardQuestion 10 1 pts The table below shows the exchange rates between the US dollar and currencies from four other countries. How much of their local currency (Yen) would someone from Japan need to buy an Ipad that is being sold for $400 in the US? Units of Foreign Currency you can buy with one US dollar Number of US dollars you can buy with one unit of Foreign currency Indian Rupee 71.94 A Euro 0.91 Turkish Lira Japanese Yen 0.17 D 0.0092 O 3.68 Yen 400 Yen 43478.26 Yen O 368 Yenarrow_forwardUsing the data calculate the balance on current account for this economy. The value of the current account is: $ Round your solution to the nearest whole number and be sure to include a negative sign if necessary. Current Account Value Balance Exports of Goods $500 Imports of Goods 1600 Balance of Trade - 1100 Exports of Services Imports of Services Balance of Services 350 -300 50 50 Income Received on 400 Investments Income Payments on -700 Investments Net Income on -300 Investments Net Transfers -100arrow_forward
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