determine the purchasing power of the country China for a consumer good that they would buy from their Canadian trading partner. Also, calculate what Canada’s purchasing power is with a country that they import from. See example below on Coca Cola and Mexico.
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determine the
consumer good that they would buy from their Canadian trading partner. Also, calculate what
Canada’s purchasing power is with a country that they import from. See example below on Coca Cola
and Mexico.
Purchasing Power Example
the equivalent of $10/hour CAD (or 100 pesos/hour according to our fictional exchange rate), the
Mexican employee would actually enjoy greater purchasing power (the ability to acquire 20 colas
versus only 10 colas) than his/her Canadian counterparts.
Step by step
Solved in 2 steps
- Consider the following Purchasing Power Parity (PPP) conversion rate for selected countries in 2021. The table shows the equivalent purchasing power of per USD in each country. Table 1. PPP conversion rate, 2021 (local currency unit per USD) 2021 Country (currency) Indonesia (IDR) Japan (JPY) 4,738.64 61.47 Taiwan, ROC (TWD) 13.48 Source: OECD, 2022 If a 'Subway' tuna mayo sandwich in Indonesia costs IDR 37,500.00, how much does it cost in Taiwan? (Hint: the PPP conversion rate is the real exchange rate to USD) a. TWD342.39. b. TWD109.53. C. TWD2,709.54. d. TWD7.91.B C D E F G H J K L M e US dollar to Euro exchage rate is 0.886, The US dollar to Austailian dollar exchange rate is 0.5352 and canadian dollar to US dollar exchange rate is 1.5815 lculate: The Euro to US dollar, the Australian dollar to US dollar and the US dollar to canadian dollar exchange rates. xchange rates beginning ending minimum median 0.886 maximun mean dollar to foreign currencyThe demand for Australian dollars in the foreign exchange market equals 14000 – 3000e and thesupply of Australian dollars in the foreign exchange market equals 2000 + 2000e, where e is thenominal exchange rate expressed in euros per Australian dollar. If the Australian dollar is fixed at 2euros per Australian dollar, then to maintain this fixed rate, what is the required change in theReserve Bank of Australia’s holdings of euros? 1increase by 4000 euros 2decrease by 2000 euros 3decrease by 4000 euros 4increase by 2000 euros
- The USD vs. GBP exchange rate is $1.50 vs. £1. A UK MNC operating in the US plans to sell goods worth $100 mil- lion at today’s prices to US customers. Show that its GBP revenue in r eal terms will not be affected if PPP applies under each of the following conditions: (i) UK and US inflation at 5% p.a. (ii) UK inflation 5%, US inflation 2%. (iii) UK inflation 2%, US inflation 5%.The accompanying table provides nominal exchange rates for the U.S. dollar. Country Foreign currency/dollar Canada (Canadian dollar) 1.256 Mexico (peso) 20.19 Dollar/foreign currency O a. 25.359; 0.039 Ob. 16.075, 0.062 O c. 0.062; 16.075 O d. 0.039; 25.359 0.796 0.050 Based on these data, the nominal exchange rate equals approximately dollar or, equivalently, Canadian dollars per peso. pesos per CanadianA South American country has had a high rate of inflation. Recently, its exchange rate was 15 cruzados per dollar; that is, one dollar will buy 15 cruzados. It is likely that the country will continue to experience a 25% inflation rate and that the U.S. will continue at a 3% inflation rate. Assume that the exchange rate will vary the same as the inflation. In this situation, one dollar will buy how many cruzados 5 years from now?
- Find the following cross rates. a) Chinese Yuan/Japanise Yen (i.e. how many Chinese Yuan are needed to buy 1 Janapise Yen?) b) UK Pound/Mexican Peso (i.e. how many Pounds are needed to buy 1 Peso?)D2 The Steel was sold $650 / ton in the U.S.; the same type of steel was sold for Euro 400/ton. If the nominal exchange rate between Euro and dollar is $1.12/Euro, what is the real exchange rate between U.S. steel and European Steel? Which currency is overvalued (given a brief reason for your thought based on purchasing power parity)?The Central American country of Belize is one of approximately 14 Caribbean community countries that pegs its currency to the U.S. dollar. The pegged rate is 2 Belize dollars equal 1 U.S. dollar (2 BZD = 1 USD or 1 BZD = 0.50 USD). This is illustrated in the figure below. Exchange Rate (USD BZD) 2.00 1.00 0.50 D Quantity of Belize dollars traded per day How will the actions of speculators affect this market? O The Belize dollar supply curve will shift to the right and the Belize dollar demand curve will shift to the left. O The Belize dollar supply curve and the Belize dollar demand curve will shift to the right. O The Belize dollar supply curve will shift to the left and the Belize dollar demand curve shift to the right. The Belize dollar supply curve and the Belize dollar demand curve will shift to the left.
- Which of the following will dcrease the supply of US dollars in the foreign exchange market? (A) US consumer demand fewer imports (B) Foreigners increase their demand for US goods ©) US residents increase their travel abroad Foreign Investors see increased investment opportunities in the US3 / 3 100% 每 8. The price of a laptop in the United States is $1,000. The price of a car in taly is 10,000 euros The current exchange rate rs09 curos per dollr. Ifa laptop is exported from the United Startes to Italy with no barriers to trade, what will be the price of the aptop in Italy? Ira car is imported to the United States from luh with barriers to trade, what will be the price of the crin ahe Ented Statres? Suppose the dollar appreciates by 0pereent aganscihecomo. Whr will be the price ofa computer exporied from the United States changem ltaly? -Suppose thhe dollarapprecites br 10 percentagamst the curoWt willbethe price of a car inmported to the Enred States from Ital chnge m tdhe Eaed Statese (8 marks) (2marks) 2marks) (2marks] (2marks)Between 1975 and 1995, U.S. infation averaged 5.7% per year, whileinfation in Japan averaged 3.6% per year. At what rate should we expectthe dollar to depreciate against the yen between 1975 and 1995?