Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥4,200,000. The exchange rate is ¥109.60/$. The forecast rate of inflation in the United States is 2.5% per year and is 1.5% per year in Japan. Use this data to answer the following questions on exchange rate passthrough. What was the export price for the Corolla at the beginning of the year expressed in the U.S. Dollars? Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? Assuming a 65% pass-through of the exchange rate, what will be the dollar price of a Corolla at the end of the year?
Assume that the export price of a Toyota Corolla from Osaka, Japan is ¥4,200,000. The exchange rate is ¥109.60/$. The forecast rate of inflation in the United States is 2.5% per year and is 1.5% per year in Japan. Use this data to answer the following questions on exchange rate passthrough. What was the export price for the Corolla at the beginning of the year expressed in the U.S. Dollars? Assuming purchasing power parity holds, what should the exchange rate be at the end of the year? Assuming a 65% pass-through of the exchange rate, what will be the dollar price of a Corolla at the end of the year?
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 12E
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- Assume that the export
price of a Toyota Corolla from Osaka, Japan is ¥4,200,000. The exchange rate is ¥109.60/$. Theforecast rate of inflation in the United States is 2.5% per year and is 1.5% per year in Japan. Use this data to answer the following questions on exchange rate passthrough.
- What was the export price for the Corolla at the beginning of the year expressed in the U.S. Dollars?
- Assuming
purchasing power parity holds, what should the exchange rate be at the end of the year? - Assuming a 65% pass-through of the exchange rate, what will be the dollar price of a Corolla at the end of the year?
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