Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 30, Problem 30.2.13PA
Subpart (a):
To determine
The relation between euro’s fall and German export.
Subpart (b):
To determine
The relation between euro’s fall and German export.
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Consider the exchange rate between the Saudi riyal and the euro. Suppose the Saudi government and the Eurozone governments agree to fix the
exchange rate at 1 riyal per euro, as shown by the grey line on the following graph.
Refer to the following graph when answering the questions that follow.
EXCHANGE RATE (Riyal per euro)
4.0
3.5
3.0
1.5
1.0
0.5
0
0
4
Supply of Euros
Demand for Euros
8
12 16 20
QUANTITY OF EUROS (Billions)
24 28 32
At the official riyal price of euros, there is a
At the official exchange rate of 1 riyal per euro, the euro is
pay
and the Saudi riyal is
▼ for European exports than they would with a free-floating exchange rate.
of euros in the foreign exchange market.
, which means that Saudis
Suppose the governments in the Eurozone and Saudi Arabia agree to change the official exchange rate from 1 riyal per euro to 2 riyal per euro. The
action represents a
of the euro and a
of the riyal.
Consider the exchange rate between the Moroccan dirham and the euro. Suppose the Moroccan government and the Eurozone governments agree to
fix the exchange rate (ER) at 2.5 dirham per euro, as shown by the grey line on the following graph.
Refer to the following graph when answering the questions that follow.
EXCHANGE RATE (Dirham per euro)
4.0
3.5
1.0
0.5
0
0
2
4
12
QUANTITY OF EUROS (Billions)
6
8
10
Supply of Euros
ER
"Demand for Euros
At the official dirham price of euros, there is a
14
At the official exchange rate of 2.5 dirham per euro, the euro is
that Moroccans pay
16
?
and the Moroccan dirham is
for European exports than they would with a free-floating exchange rate.
of euros in the foreign exchange market.
, which means
Suppose the governments of the Eurozone and Morocco reevaluate their currencies so that their official exchange rate is now 1 dirham per 1 euro.
This action results in
of the euro.
8. Purchasing-power parity
Using data from The Economist's Big Mac Index for 2019, the following table shows the local currency price of a Big Mac in several countries as well as
the actual exchange rate between each country and the United States. At the time of the data collection, a Big Mac would have cost you $5.74 in the
United States and GBP 3.29 in the United Kingdom. The actual exchange rate between the British pound and the U.S. dollar was $1.25 per pound. The
dollar price of a Big Mac purchased in the United Kingdom was, therefore, computed as follows:
Dollar price of a Big Mac in the United Kingdom = GBP 3.29 X
= $4.11
For the price you paid for a Big Mac in the United States, you could have purchased a Big Mac in the United Kingdom and had some change left over
for fries!
Complete the final column of the table by computing the dollar price of a Big Mac for the countries where this amount is not given.
Note: Round your answers to the nearest cent.
Brazil
Switzerland
United…
Chapter 30 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 30.A - Prob. 1RQCh. 30.A - Prob. 2RQCh. 30.A - Prob. 3RQCh. 30.A - Prob. 4RQCh. 30.A - Prob. 5RQCh. 30.A - Prob. 6RQCh. 30.A - Prob. 7PACh. 30.A - Prob. 8PACh. 30.A - Prob. 9PACh. 30.A - Prob. 10PA
Ch. 30.A - Prob. 11PACh. 30.A - Prob. 12PACh. 30.A - Prob. 13PACh. 30.A - Prob. 14PACh. 30.A - Prob. 15PACh. 30.A - Prob. 1RDECh. 30 - Prob. 30.1.1RQCh. 30 - Prob. 30.1.2RQCh. 30 - Prob. 30.1.3PACh. 30 - Prob. 30.1.4PACh. 30 - Prob. 30.1.5PACh. 30 - Prob. 30.1.6PACh. 30 - Prob. 30.2.1RQCh. 30 - Prob. 30.2.2RQCh. 30 - Prob. 30.2.3RQCh. 30 - Prob. 30.2.4RQCh. 30 - Prob. 30.2.5PACh. 30 - Prob. 30.2.6PACh. 30 - Prob. 30.2.7PACh. 30 - Prob. 30.2.8PACh. 30 - Prob. 30.2.9PACh. 30 - Prob. 30.2.10PACh. 30 - Prob. 30.2.11PACh. 30 - Prob. 30.2.12PACh. 30 - Prob. 30.2.13PACh. 30 - Prob. 30.2.14PACh. 30 - Prob. 30.2.15PACh. 30 - Prob. 30.2.16PACh. 30 - Prob. 30.2.17PACh. 30 - Prob. 30.2.18PACh. 30 - Prob. 30.2.19PACh. 30 - Prob. 30.2.20PACh. 30 - Prob. 30.3.1RQCh. 30 - Prob. 30.3.2RQCh. 30 - Prob. 30.3.3PACh. 30 - Prob. 30.3.4PACh. 30 - Prob. 30.3.5PACh. 30 - Prob. 30.2RDE
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