In the international market for lumber, suppose Canadian lumber sells for $100 per tonne while Chinese lumber sells for 500 Chinese yuan per tonne. a) What is Purchasing Power Parity? If the current exchange rate is 4 yuan per Canadian dollar, does Purchasing Power Parity hold? b) If the current exchange rate is 4 yuan per dollar, what is the value of the real exchange rate between Canada and China? To earn a profit by exploiting the arbitrage opportunity, in which country should you buy lumber and in which country should you sell it? c) Suppose that money-supply growth is higher in China than it is in Canada. What does purchasing-power parity imply will happen to the real and to the nominal exchange rate? + v ... Paragraph BIU A EN III

Suppose that the US price level is $15,000/consumption bundle and that the UK price level is (Pounds) 10,000/consumption bundle. Let the exchange rate be 0.75 (Pound per Dollar). Assuming no transaction costs, if we buy goods in the United Kingdom with our $1 million and sell them in the United States, we will receive Please do fast ASAP fast

If a Japanese car costs P*=1,000,000 yen, a similar American car costs P= 20,000, and a dollar can buy 100 yen, e= 100 yen/$. Car is assumed to be identical and japan is next door to New Hampshire for simplicity: a. What is the real exchange rate? In which country is car more expensive? b. From which country would you buy and which country would you sell?

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The Big Mac index is used as a rough measure of purchasing power parity across countries. The Economist magazine recently included the Vietnamese dong in its calculation of the Big Mac index. A Big Mac costs $5.06 in the United States but only 60,368 dong or $2.66 in Vietnam (at the current exchange rate). What does this information suggest about the value of the real exchange rate of the U.S. dollar relative to the Vietnamese dong (treating the United States as the domestic economy, so the nominal exchange rate is expressed as dong per dollar)? Is the real exchange rate likely to be greater than or less than 1?

Presently, the dollar is worth 140 Japanese yen in the spot market. The interest rate in Japan on 90-day government securities is 4 percent; it is 8 percent in the United States. a. If the interest-rate parity theorem holds, what is the implied 90-day forward exchange rate in yen per dollar? b. What would be implied if the U.S. interest rate were 6 percent?

If the dollar/pound exchange rate is $2/pound, a Big Mac costs $5 in New York City and costs 2 pounds in London, the pound is and U.S. tourists will be overvalued; better off in New York undervalued; better off in New York undervalued; better off in London overvalued; better off in London

The euro/dollar exchange rate is 1 euro = $1.20. According to the law of one price, a camera that sells for $240 in New York should sell for how many euros in Germany?

Explain why an increase in national saving (S) relative to investment (I) may lead to a current account surplus under flexible exchange rates.

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…