Chapter 18: Q. 12 (page 495)
If American auto companies make a breakthrough in automobile technology and are able to produce a car that gets 200 miles to the gallon, what will happen to the U.S. dollar exchange rate?
The value of the U.S. dollar will appreciate and the U.S. exchange rate will go up.
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Go to the St. Louis Federal Reserve FRED database, and find data on the exchange rate of U.S. dollars per British pound (DEXUSUK). A Mini Cooper can be purchased in London, England, for
a. Use the most recent exchange rate available to calculate the real exchange rate of the London Mini per Boston Mini.
b. Based on your answer to part (a), are Mini Coopers relatively more expensive in Boston or in London?
c. What price in British pounds would make the Mini Cooper equally expensive in both locations, all else being equal?
If the Canadian dollar to U.S. dollar exchange rate is 1.24 and the British pound to U.S. dollar exchange rate is 0.68, what must be the Canadian dollar to British pound exchange rate?
“A country is always worse off when its currency is weak (falls in value).” Is this statement true, false, or uncertain? Explain your answer.
If a strike takes place in France, making it harder to buy French goods, what will happen to the value of the U.S. dollar?
International travelers and business people frequently need to accurately convert from one currency to another. It is often easy to find the rate needed to convert the U.S. dollar into another currency. It can be more difficult to find exchange rates between two non U.S. currencies. Go to http://www.oanda.com/convert/ classic. This site lets you convert from any currency into any other currency. How many Lithuanian litas can you currently buy with one Chilean peso?
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