Homework Answers
(a) Nominal Exchange Rate- It tells how much foreign currency can be exchanged for a unit of domestic currency. It is the value of money which is received in an exchange with another currency.
Real Exchange Rate- It tells how much goods and services in the domestic country can be exchanged for the goods and services in a foreign country. It actually determines the ratio of price in the local market to the price in the foreign market.
Formula : (Nominal Exchange Rate X Domestic Price)/ Foreign price
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Question 2 (a) Explain the difference between nominal exchange rate and real exchange rate (6) As mentioned in clas...
a As mentioned in class, the Big Mac Index is a numerical tool for assessing disparities...
a As mentioned in class, the Big Mac Index is a numerical tool for assessing disparities in consumer purchasing power between countries. Suppose that the Big Mac costs 7.50 Canadian dollars in Canada and 5.50 US dollars in the US. Suppose that the nominal exchange rate is 1.2 Canadian dollars to 1 US dollar. (i) Calculate the real exchange rate. (ii) Is the Canadian dollar undervalued or overvalued against the US dollar? Explain.
Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate o...
Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate of C$1.340/US$. What should the Bank of Canada do? a. Stop trading with the U.S. so that fewer U.S. dollars will flow into Canada. b. Sell U.S. dollars (buy Canadian dollars). c. Sell Canadian dollars (buy U.S. dollars). d. Purchase British pounds and sell French francs.
Suppose the exchange rate...
If a Big Mac is selling in the United States for $3.65, what is the implied exchange rate between each of the currencie...
If a Big Mac is selling in the United States for $3.65, what is the implied exchange rate between each of the currencies in the table? (Enter your responses rounded to two decimal places.) Country Brazil Poland South Korea Czech Republic Big Mac Price 7.60 reais 7.20 zlotys 3,250 won 67.10 korunas Implied Exchange Rate 2.08 reais per dollar 1.97 zlotys per dollar 890.41 won per dollar 18.38 korunas per dollar Actual Exchange Rate 1.58 reais per dollar 2.03 zlotys...
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.
You read in a newspaper that the nominal interest rate is 12 percent per year in Canada and 8 percent per year in the U...
You read in a newspaper that the nominal interest rate is 12 percent per year in Canada and 8 percent per year in the United States. Suppose that international capital flows equalize the real interest rates in the two countries and that purchasing power parity holds. a. Using the Fisher equation, what can you infer about expected inflation in Canada and in the United States? b. What can you infer about the expected change in the exchange rate between the...
3-6 Class An exchange rate is a number that describes how much of one currency you can trade for ...
please complete these problems
3-6 Class An exchange rate is a number that describes how much of one currency you can trade for another currency. For example, if the U.S. exchange rate for Canadian currency is 1.2, it means that you could trade one U.S. dollar for $1.20 Canadian. When travelers talk about how expensive or cheap a certain country is, it's often a reflection of the exchange rate. The Big Mac costs mentioned earlier? The average cost in the...
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...
How nominal exchange rate is different from real exchange rate? What is the relationship between purchasing-power...
How nominal exchange rate is different from real exchange rate? What is the relationship between purchasing-power parity and exchange rates? 3.What is the impact on new housing investment, if there is a decrease in real interest rates? (5 points) 4.What is the impact on the loanable funds market, if the quantity of loanable funds supplied is more than the quantity demanded?
Someone tells you that the real exchange rate between the US and Canada for oil is...
Someone tells you that the real exchange rate between the US and Canada for oil is 1.05, and for houses 1.3. Given your understanding of purchasing power parity, does this seem reasonable?
I The nominal exchange rate is the price of one currency in terms of another country's currency a...
i The nominal exchange rate is the price of one currency in terms of another country's currency are needed to buy one unit of another country's currency. t Suppoce the folowing table presents nominal exchange rat information in the table to answer the questions that follow e data for May 21, 2014, in terms of u.s, ollars per unst of foresign currency. use the (Dollars) Braziian real (BRL) 0.8493 Suppose that on May 21, 2014, an omamental bookcase handmade in...
Suppose the exchange rate between the Canadian dollar (CS) and the American dollar (USS) changes from C$1.340/US$ to C$1.325/USS, but the Canadian government wants to maintain a fixed exchange rate of C$1.340/US$. What should the Bank of Canada do? a. Stop trading with the U.S. so that fewer U.S. dollars will flow into Canada. b. Sell U.S. dollars (buy Canadian dollars). c. Sell Canadian dollars (buy U.S. dollars). d. Purchase British pounds and sell French francs.
Suppose the exchange rate...
If a Big Mac is selling in the United States for $3.65, what is the implied exchange rate between each of the currencies in the table? (Enter your responses rounded to two decimal places.) Country Brazil Poland South Korea Czech Republic Big Mac Price 7.60 reais 7.20 zlotys 3,250 won 67.10 korunas Implied Exchange Rate 2.08 reais per dollar 1.97 zlotys per dollar 890.41 won per dollar 18.38 korunas per dollar Actual Exchange Rate 1.58 reais per dollar 2.03 zlotys...
please complete these problems
3-6 Class An exchange rate is a number that describes how much of one currency you can trade for another currency. For example, if the U.S. exchange rate for Canadian currency is 1.2, it means that you could trade one U.S. dollar for $1.20 Canadian. When travelers talk about how expensive or cheap a certain country is, it's often a reflection of the exchange rate. The Big Mac costs mentioned earlier? The average cost in the...
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...
i The nominal exchange rate is the price of one currency in terms of another country's currency are needed to buy one unit of another country's currency. t Suppoce the folowing table presents nominal exchange rat information in the table to answer the questions that follow e data for May 21, 2014, in terms of u.s, ollars per unst of foresign currency. use the (Dollars) Braziian real (BRL) 0.8493 Suppose that on May 21, 2014, an omamental bookcase handmade in...
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