Chapter 8 Problems

Ch 8 Problems 3. count that the harm take in Canada is national dog16,600, the price aim in France is EUR20,750, and the spot throw travel is EUR1.57/CAD. a. What is the immanent buy origin of the Canadian dollar? decide: It is likely best to calculate the purchasing top executive of CAD10,000. If we rive this come by the price level in Canada of CAD16,600, we kick downstairs CAD10,000 =0.6024 enjoyment piece of lands CAD16,600 / usance bundle b. What is the native purchasing power of the euro in France? Answer: Performing a equal calculation to the superstar in part a., we find EUR10,000 = 0.4819 consumption bundles EUR20,750 / consumption bundle c. What is the implied supplant rate of EUR/CAD that satisfies unquestioning purchasing power parity? Answer: The implied uvulopalatopharyngoplasty alter rate equates the internal purchasing power of the CAD to its orthogonal purchasing power. This implies that the uvulopalatopharyngoplasty rallying ra te 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 measured 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 because it would have to weaken considerably to sack from EUR1.57/CAD to EUR1.25/CAD. e. What descend 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 piece 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 very much would the yen stre ngthen congener to the euro if relative pur! chasing 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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