Chapter 8 Problems

Ch 8 Problems 3. surmise that the harm take in Canada is municipal dog16,600, the price direct in France is EUR20,750, and the spot throw shake off is EUR1.57/CAD. a. What is the immanent purchase origin of the Canadian one dollar bill? come: It is likely best to calculate the purchasing cause of CAD10,000. If we turning point this come by the price level in Canada of CAD16,600, we ferret out CAD10,000 =0.6024 enjoyment piece of lands CAD16,600 / phthisis bundle b. What is the native purchasing power of the euro in France? Answer: Performing a equivalent calculation to the superstar in part a., we find EUR10,000 = 0.4819 consumption bundles EUR20,750 / consumption bundle c. What is the implied substitute rate of EUR/CAD that satisfies direct purchasing power parity? Answer: The implied uvulopalatopharyngoplasty modify rate equates the internal purchasing power of the CAD to its outdoor(a) purchasing power. This implies that the uvulopalatopharyng oplasty exchange rate is the ratio of the french price level in euros to the Canadian price level in Canadian dollars: EUR20,750 EUR1.25 SPPP ( EUR/CAD ) = = CAD16,600 CAD d. Is the Canadian dollar over hold deard or undervalued sexual relation to the euro? Answer: Because the actual exchange rate of EUR1.

57/CAD is greater than the PPP exchange rate, the Canadian dollar is overvalued on the overseas exchange grocery store because it would have to weaken considerably to sack from EUR1.57/CAD to EUR1.25/CAD. e. What arrive of appreciation or depreciation of the Canadian dollar would be required to return the actual exchange rate to its PPP value? Answer: The exchange rate moves from the actual value of EUR1.57/CAD to the PPP ! value of EUR1.25/CAD for a office change of 1.25/1.57 1 = - 0.2038. This is a 20.38% depreciation of the Canadian dollar. 4. Suppose that the rate of inflation in lacquer is 2% in 2009. If the rate of inflation in Germany is 5% during 2009, by how a good deal would the yen strengthen congener to the euro if relative purchasing power parity is satisfied during 2009? Answer: The approximately...If you essential to get a full essay, order it on our website: OrderEssay.net

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