PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 17, Problem 1P
To determine
Identify the nominal exchange rate.
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The U.S. dollar exchange rate increased from $0.96 Canadian in June 2011 to $1.03 Canadian in June 2012, and it decreased from 81 Japanese yen in June 2011 to 78 yen in June 2012.
1. Did the U.S. dollar appreciate or depreciate against the Canadian dollar? Did the U.S. dollar appreciate or depreciate against the yen?
2. What was the value of the Canadian dollar in terms of U.S. dollars in June 2011 and June 2012? Did the Canadian dollar appreciate or depreciate against the U.S. dollar over the year June 2011 to June 2012?
3. What was the value of 100 yen in terms of U.S. dollars in June 2011 and June 2012? Did the yen appreciate or depreciate against the U.S. dollar over the year June 2011 to June 2012?
The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency.
Suppose the following table presents nominal exchange rate data for May 21, 2019, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow.
Foreign Currency
Cost of One Unit of Foreign Currency
(Dollars)
Brazilian real (BRL)
0.3666
Canadian dollar (CAD)
0.8493
Euro (EUR)
1.3288
Japanese yen (JPY)
0.009748
Mexican peso (MXN)
0.0889
United Kingdom pound (GBP)
1.8965
Suppose that on May 21, 2019, a marble statue handmade in Brazil is priced at BRL 2,750. The approximate U.S. dollar price of the statue would be .
If the nominal exchange rate for the U.S. dollar–euro rises from $1.3288 to $1.52812 per euro, the euro in value, or , relative to the U.S. dollar.
Suppose that on January 1, the dollar exchange rate with the yen is 1/120 $/Y.
Over the year, the Japanese inflation rate is 5%, and the US inflation rate is 10%.
If the exchange rate at the end of the year is 1$=130Y, does the yen appear to be
overvalued, undervalued, or at the PPP level? Explain. What if Japanese inflation
were 10% and the US inflation rate were 5% over the year, instead? Explain why
your answer changes.
Chapter 17 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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