The nominal exchange rate is the price of one currency in terms of another curre

Question

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 August 14, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Suppose that on August 14, 2014, an ornamental bookcase handmade in Canada is priced at CAD 1,180. The approximate U.S. dollar price of the bookcase would be. If the nominal exchange rate for the U.S. dollar-Japanese yen falls from $0.009748 to $0.0082858 per Japanese yen, the U.S. dollar in value, or, relative to the Japanese yen.

Explanation / Answer

a)

Exchange rate: 1 CAD = 0.8493$

Value of bookcase = 1180×0.8493 = $1002.174

b)

If the $-Yen exchange rate falls from $0.009748 to $0.0082858, the US dollar increases in value, or appreciates, relative to Yen.

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