Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 41, Problem 9DQ
To determine
Whether a fixed exchange rate is a simultaneous
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Which of the following statements is true of a flexible exchange rate system?
O A. Market forces tend to undervalue a currency over time.
O B.
Market forces tend to push the exchange rate of a currency to market clearing levels over time.
Market forces do not affect exchange rates between different currencies.
O C.
O D. Market forces tend to overvalue a currency over time.
If the ratio of the dollar price of a U.S. toy to the dollar price of the same toy sold in China is greater than one, retailers in the United States should
O A. should not buy the toys from both Chinese suppliers and U.S. suppliers
O B. buy the toys from Chinese suppliers
O C. buy the toys from both Chinese suppliers and U.S. suppliers
O D. buy the toys from American suppliers
Which of the following is likely to be true of the nominal and the real exchange rates in the short run and in the long run if prices in two countries do not
respond to exchange rate changes?
O A. The real and the nominal exchange rates between…
Suppose a basket of goods costs $50 in the U.S. and €20 in France. What
exchange rate, in dollars per euro, would be consistent with purchasing power
parity?
O $1.50
O $0.40
O $2.50
O $2
In Windsor, Ontario, a Big Mac from McDonald's costs C$4.17 (Canadian dollars), and across the border in Detroit it costs $3.56 (US dollars).
a. Suppose the nominal US exchange rate with Canada is US$0.74 per Canadian dollar. Does purchasing power parity hold between the two countries?
O Yes, it holds because the Canadian Big Mac costs less in terms of U.S. dollars.
O No, it does not hold because the Canadian Big Mac costs more in terms of U.S. dollars.
O No, it does not hold because the Canadian Big Mac costs less in terms of U.S. dollars.
O Yes, it holds because the Canadian Big Mac costs more in terms of U.S. dollars.
b. What is the exchange rate for the US if purchasing power parity holds.
Instructions: Round your answer to three decimal places.
US dollar per Canadian dollar
$
Chapter 41 Solutions
Economics (Irwin Economics)
Ch. 41.1 - Prob. 1QQCh. 41.1 - Prob. 2QQCh. 41.1 - Prob. 3QQCh. 41.1 - Prob. 4QQCh. 41.A - Prob. 1ADQCh. 41.A - Prob. 1ARQCh. 41.A - Prob. 1APCh. 41 - Prob. 1DQCh. 41 - Prob. 2DQCh. 41 - Prob. 3DQ
Ch. 41 - Prob. 4DQCh. 41 - Prob. 5DQCh. 41 - Prob. 6DQCh. 41 - Prob. 7DQCh. 41 - Prob. 8DQCh. 41 - Prob. 9DQCh. 41 - Prob. 10DQCh. 41 - Prob. 11DQCh. 41 - Prob. 1RQCh. 41 - Prob. 2RQCh. 41 - Prob. 3RQCh. 41 - Prob. 4RQCh. 41 - Prob. 5RQCh. 41 - Prob. 6RQCh. 41 - Prob. 7RQCh. 41 - Prob. 8RQCh. 41 - Prob. 9RQCh. 41 - Prob. 10RQCh. 41 - Prob. 1PCh. 41 - Prob. 2PCh. 41 - Prob. 3PCh. 41 - Prob. 4PCh. 41 - Prob. 5P
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