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 equal 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. Suppose that on June 13, 2014, an ornamental bookcase handmade in Brazil is priced at R$2,000. The approximate U.S. dollar price of the bookcase would be . If the U.S. dollar-Brazilian real nominal exchange rate falls from the rate given by the table to $0.357 per real, the value of the U.S. dollar relative to the real.

Explanation / Answer

The price of bookcase made in Brazil is R$2000. US dollar price is 0.4067*2000 = $813.40 because 1 real is worth $0.4067

In case the US dollar real exchange rate falls from its level of 0.4067 to 0.3567, then US dollar is appeciated against real

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