This topic contains a solution. Click here to go to the answer

Author Question: The price of a computer in the United States is 1,000. The price of a car in Germany is 10,000 ... (Read 92 times)

bb

  • Hero Member
  • *****
  • Posts: 544
The price of a computer in the United States is 1,000. The price of a car in Germany is 10,000 euros. The current exchange rate is 0.9 euros per dollar.
 
  a) If a computer is exported from the United States to Germany with no barriers to trade, what will be the price of the computer in Germany? b) If a car is imported to the United States from Germany with no barriers to trade, what will be the price of the car in the United States? c) Suppose the dollar appreciates by 10 percent against the euro. How will the price of a computer exported from the United States change in Germany? d) Suppose the dollar appreciates by 10 percent against the euro. How will the price of a car imported to the United States from Germany change in the United States?

Question 2

What factors affect the demand for money?
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

Jevvish

  • Sr. Member
  • ****
  • Posts: 326
Answer to Question 1

a) The price of an American computer in Germany is 1,000  0.9 euros per dollar, which is 900 euros.
b) The price of a German car in the United States is 10,000 euros/0.9 euros per dollar = 11,111.
c) The new exchange rate is 0.9 euros per dollar  1.1 = 0.99 euros per dollar. So the new price of a U.S. computer in Germany is 1,000  0.99 euros per dollar = 990 euros. The price of a U.S. computer in Germany rises by 10 percent.
d) The new price of a German car in the United States is 10,000 euros/0.99 euros per dollar = 10,101. So the price of a German car in the United States falls by about 10 percent.

Answer to Question 2

Four factors influence the demand for money. First is the price level. An increase in the price level increases the nominal demand for money. Second is the interest rate. An increase in the interest rate raises the opportunity cost of holding money and decreases the quantity of money demanded. Third is real GDP. An increase in real GDP increases the demand for money. Fourth is financial innovation. Innovations that lower the cost of switching between money and other assets decrease the demand for money.




bb

  • Member
  • Posts: 544
Reply 2 on: Jun 29, 2018
Excellent


tranoy

  • Member
  • Posts: 344
Reply 3 on: Yesterday
Great answer, keep it coming :)

 

Did you know?

Symptoms of kidney problems include a loss of appetite, back pain (which may be sudden and intense), chills, abdominal pain, fluid retention, nausea, the urge to urinate, vomiting, and fever.

Did you know?

It is difficult to obtain enough calcium without consuming milk or other dairy foods.

Did you know?

Many people have small pouches in their colons that bulge outward through weak spots. Each pouch is called a diverticulum. About 10% of Americans older than age 40 years have diverticulosis, which, when the pouches become infected or inflamed, is called diverticulitis. The main cause of diverticular disease is a low-fiber diet.

Did you know?

In the United States, an estimated 50 million unnecessary antibiotics are prescribed for viral respiratory infections.

Did you know?

In most cases, kidneys can recover from almost complete loss of function, such as in acute kidney (renal) failure.

For a complete list of videos, visit our video library