6. Pricing foreign goods The nominal exchange rate is the price of one currency
ID: 1195475 • Letter: 6
Question
6. Pricing foreign goods
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 forecasts nominal exchange rate data for June 13, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow.
6. Pricing foreign goods
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 forecasts nominal exchange rate data for June 13, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow.
Cost of One Unit of Foreign Currency Foreign Currency Brazilian real (BRL) Canadian dollar (CAD) Euro (EUR) Japanese yen (JPY) Mexican peso (MXN) United Kingdom pound (GBP) (Dollars) 0.5148 0.9213 1.3457 0.008226 0.0926 1.9695 Suppose that on June 13, 2014, a marble statue handmade in Canada is priced at CAD 1,700. The approximate U.S. dollar price of the statue would If the nominal exchange rate for the U.S. dollar-euro rises from $1.3457 to $1.547555 per euro, the U.S. dollar in value, or relative to the euroExplanation / Answer
Price that is to be paid in US Dollar = 1,700*.9213
= 1,566.21
when nominal exchange rate for US dollar -euro rises from $1.3457 to $1.54755 per euro, the US dollar Falls in value or depreciates relative to the euro
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