Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 31, Problem 9PA
Subpart (a):
To determine
Computation of predicted exchange rate.
Sub part (b)
To determine
Computation of predicted exchange rate.
Sub part (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:
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
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
please do this for the country China.
Chapter 31 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Knowledge Booster
Similar questions
- Year 2014 2015 2016 US $ $1 $1 $1 British Pound 0.85 0.70 0.60 Based on the Exchange rates above, How might international trade be affected? A)It is cheaper for American to travel to EnglandB)The US will import more from EnglandC)England will export more to the USD)England will import more from the USarrow_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_forwardTravis takes two trips to Ecuador. On his first trip, he finds that one US dollar is worth 25000 Ecuadorian Sucre. On his return trip, he finds that the dollar is now worth 24000 Ecuadorian Sucre. What is a likely result of this change in exchange rates? American exports to Ecuador decrease Ecuadorians will invest less in US American imports from Ecuador will increase American exports to Ecuador increasearrow_forward
- The price of a laptop in Canada is C$1,000. The price of a car in Germany is 10 000 euros. The current exchange rate is 0.9 euros per Canadian dollar. If a laptop is exported from Canada to Germany with no barriers to trade, what will be the price of the laptop in Germany? If a car is imported to Canada from Germany with barriers to trade, what will be the price of the car in Canada? Suppose the Canadian dollar appreciates by 10 percent against the euro. What will be the price of a computer exported from Canada change in Germany? Suppose the Canadian dollar appreciates by 10 percent against the euro. What will be the price of a car imported to Canada from Germany change in Canada?arrow_forwardThe Table below shows data for Terrania and its three trading partners A, B, C. Assume that the effective exchange rate index in year 1 equals 100, defining the index so that a higher number means a stronger exchange rate the value of the index in year 2 is? (express your answer to 2 decimal places) Country A Country B Country C Terrania Share of Terranian Trade 0.4 0.3 0.3 Exchange Rate (units per Terranian Kwacha) year 1 year 2 Price Level year 1 year 2 1 3 2 4 1 1 1 1 1.1 1.2 1.3 1arrow_forwardHow would I find the actual exchange rate to answer the bottom part of the data shown.arrow_forward
- Suppose 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_forwarddollars? Show your calculations. 5) What are the main determinants of imports into the country? What are the main determinants of exports out? 6) What are the main factors affecting the US Dollar- EU Euro exchange rate/f 7) What are the causes of the persistent US trade deficit? 8) Should the US go back to the classical gold standard? Explain why returning to the gold standard is not a good idea.arrow_forwardWhat is an export parity price? Give an export parity price for a specified commodity. (starting with the f.o.b price)arrow_forward
- not use ai pleasearrow_forwardIf the domestic prices for traded goods rose 50 percent over 10 years in Japan and 100 percent over those same 10 years in United States, what would happen to the yen/dollar exchange rate? Why?arrow_forwardDiscuss why the demand and/or supply of a currency would shift, and the impact this would have on equilibrium exchange rates. In your examples include changes in expectations about future exchange rates, differences across countries in rates of return, changes in relative inflation, and the effect of purchasing power parity.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
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning