Consider the United States and the countries it trades with the most (measured in trade volume): Canada, Mexico, China, and Japan. For simplicity, assume these are the only four countries with which the United States trades. Trade shares (trade weights) and U.S. nominal exchange rates for these four countries are as follows: Country (currency) Share of Trade $ per FX in 2015 $ per FX in 2016 Canada (dollar) 36% 0.8271 0.6892 Mexico (peso) 28% 0.0683 0.0538 China (yuan) 20% 0.1608 0.1522 Japan (yen) 16% 0.0080 0.0086 Compute the percentage change from 2015 to 2016 in the four U.S. bilateral exchange rates (defined as U.S. dollars per unit of foreign exchange, or FX) in the table provided. Use the trade shares as weights to compute the percentage change in the nominal effective exchange rate for the United States between 2015 and 2016 (in U.S. dollars per foreign currency basket). Based on your answer to (b), what happened to the value of the U.S. dollar against this basket between 2015 and 2016? How does this compare with the change in the value of the U.S. dollar relative to the Mexican peso? Explain your answer
Consider the United States and the countries it trades with the most (measured in trade volume): Canada, Mexico, China, and Japan. For simplicity, assume these are the only four countries with which the United States trades. Trade shares (trade weights) and U.S. nominal exchange rates for these four countries are as follows: Country (currency) Share of Trade $ per FX in 2015 $ per FX in 2016 Canada (dollar) 36% 0.8271 0.6892 Mexico (peso) 28% 0.0683 0.0538 China (yuan) 20% 0.1608 0.1522 Japan (yen) 16% 0.0080 0.0086 Compute the percentage change from 2015 to 2016 in the four U.S. bilateral exchange rates (defined as U.S. dollars per unit of foreign exchange, or FX) in the table provided. Use the trade shares as weights to compute the percentage change in the nominal effective exchange rate for the United States between 2015 and 2016 (in U.S. dollars per foreign currency basket). Based on your answer to (b), what happened to the value of the U.S. dollar against this basket between 2015 and 2016? How does this compare with the change in the value of the U.S. dollar relative to the Mexican peso? Explain your answer
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Consider the United States and the countries it trades with the most (measured in trade volume): Canada, Mexico, China, and Japan. For simplicity, assume these are the only four countries with which the United States trades. Trade shares (trade weights) and U.S. nominal exchange rates for these four countries are as follows:
Country (currency) | Share of Trade | $ per FX in 2015 | $ per FX in 2016 |
---|---|---|---|
Canada (dollar) | 36% | 0.8271 | 0.6892 |
Mexico (peso) | 28% | 0.0683 | 0.0538 |
China (yuan) | 20% | 0.1608 | 0.1522 |
Japan (yen) | 16% | 0.0080 | 0.0086 |
- Compute the percentage change from 2015 to 2016 in the four U.S. bilateral exchange rates (defined as U.S. dollars per unit of foreign exchange, or FX) in the table provided.
- Use the trade shares as weights to compute the percentage change in the nominal effective exchange rate for the United States between 2015 and 2016 (in U.S. dollars per foreign currency basket).
- Based on your answer to (b), what happened to the value of the U.S. dollar against this basket between 2015 and 2016? How does this compare with the change in the value of the U.S. dollar relative to the Mexican peso? Explain your answer
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education