ZuoTi.Pro
Question

Ch15. Exchange Rates in the Long Run 1. Suppose that on January 1, the yen price of the dollar is 120. Over the year, the Japanese inflation rate is 5 percent and the U.S. inflation rate is 10 percent. If the exchange rate is $1- Yen 130 at the end of the year, does the yen appear to be overvalued, undervalued, or at the PPP level? Explain your answer In 1990, a U.S. dollar sold for 1.30 Swiss francs. If PPP held in 1990, what would the PPP value of the exchange rate have been in 2004 if Swiss inflation was 22 percent and U.S. inflation was 36 percent between 1990 and 2004? Show your calculation. 2. 3. What is the real exchange rate? What does the real exchange rate equal if absolute PPP holds? Will an increase in the real exchange rate make domestic goods more or less competitive relative to foreign goods? Answer #3 please
business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)

All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Answer #3 please Ch15. Exchange Rates in the Long Run 1. Suppose that on January 1,...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Similar Homework Help Questions

  • Suppose that on January 1, the Yen price of the dollar is 95 (C$1= ¥100). Over the year, the Japanese inflation rate is 5%, and the Canadian inflation rate is 7%. At the end of the year, the exchange rate is C$1 = ¥98.

          Suppose that on January 1, the Yen price of the dollar is 95 (C$1= ¥100).  Over the year, the Japanese inflation rate is 5%, and the Canadian inflation rate is 7%.  At the end of the year, the exchange rate is C$1 = ¥98.   (a)   Based on this information is Yen undervalued or overvalued according to PPP? Explain.What happened to the real exchange rate? Explain.

  • 1. If a fixed exchange rate is set below the equilibrium rate in a fixed exchange...

    1. If a fixed exchange rate is set below the equilibrium rate in a fixed exchange rate system it will create     a deficit in the balance of payments.    a surplus in the balance of payments.     inflation.     deflation. 2. Which of the following items is not a flow? A.Unilateral transfers. B. The increase in foreign assets held by Australian investors over a period of six months. C. Foreign exchange reserves lost by the Reserve Bank as a result of intervention in...

  • a. What is the Fl's net exposure in Swiss francs stated in Swiss francs (Sf) and...

    a. What is the Fl's net exposure in Swiss francs stated in Swiss francs (Sf) and in dollars ($)? b. What is the Fl's net exposure in British pounds stated in British pounds (£) and in dollars ($)? c. What is the Fl's net exposure in Japanese yen stated in Japanese yen (¥) and in dollars ($)? (Negative amounts should be indicated by a minus sign.) d. What is the expected loss or gain if the Sf exchange rate appreciates...

  • 13.05 Currency Exchange Rates Custom Shutters, Inc., manufactures plantation shutters according to customer order. The company...

    13.05 Currency Exchange Rates Custom Shutters, Inc., manufactures plantation shutters according to customer order. The company has a reputation for producing excellent quality shutters that fit virtually any size or shape of window. Sales are made in all 50 states. On July 1, Custom Shutters received orders from contractors in Switzerland and Japan. Lee Mills, president and co-owner of Custom Shutters, was delighted. The Swiss order is for shutters priced at $64,000. The order is due in Geneva on September...

  • Can someone please help answer! Question 3) a. (10 points) Suppose that the rate of inflation...

    Can someone please help answer! Question 3) a. (10 points) Suppose that the rate of inflation in Japan is 2% in 2009. If the rate of inflation in Germany is 5% in 2009, by how much would the yen appreciate relative to the euro if relative PPP holds during 2009? b.(10 points) In August 1992, the lira-dollar exchange rate was ELIRS= 1103, which was 497 below its value implied by the PPP. By what percentage was the dollar undervalued? c....

  • Challenge Problem. Following are currency exchange “crossrates” between pairs of major currencies. Currency crossrates include both...

    Challenge Problem. Following are currency exchange “crossrates” between pairs of major currencies. Currency crossrates include both direct and indirect methods for expressing relative exchange rates. Currency crossrates include both direct and indirect methods for expressing relative exchange rates.       U.S.  U.K.  Swiss  Japanese  European               Dollar  Pound  Franc  Yen  Euro       EMU      1.1406      ?  0.6783  0.0087  ---       Japan       130.66  185.98  77.705     ---  114.60       Switzerland      1.6817  2.3936     ---  0.0129     ?      United Kingdom         ?      ---  0.4178     ?  0.6162      United States         ---  1.4231      ?  0.0077  0.8767 a.    Fill in the missing exchange rates in the crossrates table. b.    If the inflation rate is expected to be 3 percent in the European Monetary Union        (EMU) and 4 percent in...

  • 2. You are given the following information. The current dollar-pound exchange rate is $2 per pound....

    2. You are given the following information. The current dollar-pound exchange rate is $2 per pound. A U.S. basket that costs S100 would cost $120 in the United Kingdom. For the next year, the Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep UK. inflation at 3%. The speed of convergence to absolute PPP is 15% per year. A. What is the expected U.S. minus U.K. inflation differential for the coming...

  • 9. Suppose nominal exchange rates are 110 Japanese yen per dollar, 0.9 euro per dollar, and...

    9. Suppose nominal exchange rates are 110 Japanese yen per dollar, 0.9 euro per dollar, and 16 Mexican pesos per dollar. A pizza costs 1,600 yen in Tokyo, Japan, 12 euro in Munich, Germany, 180 pesos in Mexico City and 12 dollars in Raleigh, North Carolina. Which of the following statements is (are) correct? (x) Pizza is more expensive in Tokyo than Mexico City but less expensive than in Munich. (y) Pizza is less expensive in Raleigh than Munich but...

  • The following are the foreign currency positions of an FI, expressed in the foreign currency: Currency...

    The following are the foreign currency positions of an FI, expressed in the foreign currency: Currency Assets Liabilities FX Bought FX Sold Swiss franc (Sf) Sf 132,600 Sf 54,570 Sf 12,750 Sf 17,850 British pound (£) £ 42,500 £ 21,500 £ 15,500 £ 22,000 Japanese yen (¥) ¥ 8,200,000 ¥ 3,500,000 ¥ 1,600,000 ¥ 9,100,000 The exchange rate of dollars for Sf is 1.02, of dollars for British pound is 1.31, and of dollars for yen is .00953. The following...

  • 1.) $802, $902, $1,002, $1,202 2.) increases/decreases 3.) depreciates/appreciates 6. Pricing foreign goods The nominal exchange...

    1.) $802, $902, $1,002, $1,202 2.) increases/decreases 3.) depreciates/appreciates 6. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate speofies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.5. dollars per unit of foreign curreno, Ue the information in the table to...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT