3a) The U.S. exports computers with a domestic price of $100,000 and the yen/dol

Question

3a) The U.S. exports computers with a domestic price of $100,000 and the yen/dollar exchange rate is 120 on January 1, 2003. On January 1, 2004 the yen/dollar exchange rate 125. What is the yen price of the computers on January 1, 2003? What is the yen price of the computers on January 1, 2004?

b) The U.S. imports Japanese cars with a domestic price of 5,000,000 yen and the yen/dollar exchange rate is 120 onJanuary 1, 2003. On January 1, 2004 the yen/dollar exchange rate is 125. What is the dollar price of the cars on January 1, 2003? What is the solar price of the cars on January 1, 2004?

Explanation / Answer

Ans:

3a)

U.S. exports = $100,000

On January 1, 2003 $1 = 120 yen

On January 1, 2004 $1 = 125 yen

yen price of the computers on January 1, 2003 = $100,000 * 120 yen

= 12,000,000 yen

yen price of the computers on January 1, 2004 = $100,000 * 125 yen

= 12,500,000 yen

b)

U.S. imports = 5,000,000 yen

On January 1, 2003 $1 = 120 yen

On January 1, 2004 $1 = 125 yen

Dollar price of the cars on January 1, 2003 = 5,000,000 yen / 120 yen

= $41666.67

Dollar price of the cars on January 1, 2004 = 5,000,000 yen / 125 yen

= $40,000

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