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 75 korunas 13.5 real 5.84 C$ Hungary Czech Republic Brazil Canada 293 forints/$ 25.1 korunas/$ 4.02 real/$ 1.41 C$/$ 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: 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 75 korunas 13.5 real 5.84 C$ Hungary Czech Republic Brazil Canada 293 forints/$ 25.1 korunas/$ 4.02 real/$ 1.41 C$/$ 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

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter29: International Finance

Section: Chapter Questions

Problem 8P

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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
The 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 1
a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200 import good from Britain? d. How do these changes affect the economic welfare of U.S. exporters and U.S. importers? 2. a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.72 per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated? b. What happens to the ₤-price that British residents pay for a $500 U.S. export good due to the exchange rate change above? c. What happens to the $-price that U.S. residents pay for a ₤1200…
8. Problems and Applications Q8 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 $4.93.) Country Colombia Sri Lanka Russia Saudi Arabia France Price of a Big Mac Predicted Exchange Rate 7,900 pesos 350 rupees 114 rubles 12 riyals 4.1 € Actual Exchange Rate 3,254 pesos/$ 144 rupees/$ 74.7 rubles/$ 3.75 riyals/$ 0.93 €/$ According to purchasing-power parity, the predicted exchange rate between the Sri Lankan rupee and the euro is_ rupees per euro. However, the actual exchange rate is _rupees per euro.
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 Big Mac is $5.28. Country Price of a Big Mac Predicted Exchange Rate Actual Exchange Rate Indonesia 35 750 rupiah ___ rupiah/$US 13 359 rupiah/$US Hungary 864 forint ___ forint/$US 252 forint/$US Czech Republic 79 koruna ___ koruna/$US 20.75koruna/$US Thailand 119 baht ___ baht/$US 31.95 baht/$US China 20.4 yuan ___ yuan/$US 6.43 yuan/$US For each country, compute the predicted exchange rate of the local currency per U.S. dollar. (Recall that the U.S. price of a Big Mac was $5.28.) How well does the theory of purchasing-power parity explain exchange rates?
Suppose that the exchange rate falls from 84 yen per U.S. dollar to 71 yen per U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan to sell in the foreign exchange market? The quantity of U.S. dollars that people plan to sell in the foreign exchange market A. decreases and the supply curve of U.S. dollars shifts leftward B. increases and the supply curve of U.S. dollars shifts rightward C. increases and a movement up along the supply curve for U.S. dollars occurs D. decreases and a movement down along the supply curve of U.S. dollars occurs
1 Suppose that two countries, Indonesia and Vietnam, produce coffee. The currency unit used in Indonesia is the Rupiah (IDR). The currency unit used in Vietnam is the Dong (VND). In Vietnam, coffee sells for 4,500 dong (VND) per pound. The exchange rate is 1.57 VND per 1 IDR, EVND/IDR = 1.57. 2 If the law of one price holds, what is the price of coffee in Indonesia, measured in Rupiah (assume we are talking about the same type of coffee)? Please round your answer to the nearest whole number. Assume the price of coffee in Indonesia is actually 3000 IDR per pound. Compute the relative price of coffee in Indonesia versus Vietnam (round your answer to 2 decimal places). Where will coffee traders buy coffee? Where will they sell coffee in this case? How will these transactions affect the price of coffee in Vietnam? In Indonesia?
Relative purchasing power parity Multiple Choice explains exchange rates as being part of the equilibrium for the markets for financial assets denominated in different currencies says that a single currency will have the same price everywhere, once the prices at difference places are expressed in that currency. theorizes that the difference between changes over time in product-price levels in two countries will be offset by the change in their exchange rate over this time. suggests that the exchange rate should be equal to the ratio of the domestic price level to the foreign price level.
The following table shows the nominal and real exchange rates for two countries and two years (OECD, 2020a,b). The column names are the country codes (not the currency codes) and the exchange rates are expressed as the amount of the currency per unit of US dollar. Year 1979 1984 i. DNK: O Increased ii. ISL: DNK O Increased 5.2610 10.3566 Decreased Remained unchanged Decreased Nominal a. Indicate whether the cost of goods in each country has increased, decreased, or remained unchanged, relative to the cost of goods in the United states between 1979 and 1984. Remained unchanged ISL 3.5260 31.6937 DNK 0.6621 1.1781 Real ISL 0.8612 1.3433
Draw and carefully label the Euro-U.S. dollar foreign exchange graph as discussed in the textbook.You must use the Euro/US $ exchange rate as your price variable. Assume we are currently in marketequilibrium. Illustrate using the graph how the equilibrium euro/dollar foreign exchange rate wouldbe affected by the following events, holding all else constant. Use a different graph for each part.Explain in words why the equilibrium exchange rate changed. Show an increase in US productivity relative to the Euro Area
Suppose that yesterday, the U.S. dollar was trading on the foreign exchange market at 0.75 eurosper U.S. dollar and today the U.S. dollar is trading at 0.80 euros per U.S. dollar. Which of the twocurrencies (the U.S. dollar or the euro) has appreciated and which has depreciated today?b) Suppose that the exchange rate for the Mexican peso fell from 15 pesos per U.S. dollar to 10 pesosper U.S. dollar. What is the effect of this change on the quantity of U.S. dollars that people plan tobuy in the foreign exchange market?c) Suppose that the exchange rate rose from 80 yen per U.S. dollar to 90 yen per U.S. dollar. What isthe effect of this change on the quantity of U.S. dollars that people plan to sell in the foreignexchange market?
We look at the trade of gas between Russia and the EU and assumes that both areas' supply curves slope upwards and their demand curves slope downwards in the diagram with quantity on the horizontal axis and price on the vertical axis. To make the situation simple, we also initially assume that the exchange rate is constant, and it is 1 (so that we do not need to differentiate between the prices i Russia and the EU). In the autarky equilibria, prices are higher in the EU than in Russia. Unless otherwise specified, there are no trading costs, and the capacity of the pipelines is not binding (ie with free trade the prices are basically the same in the EU and Russia). (a) Draw and show the supply of export goods and the demand for import goods in relation to the two areas' supply and demand curves (three islands next to each other). (b) What happens (to welfare in the two countries and consumer surplus/producer surplus) if the EU stops importing Russian gas? (c) Without Nord Stream 1/2 in…