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 90 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
Thanks for the timely response, appreciate it


cici

  • Member
  • Posts: 325
Reply 3 on: Yesterday
Excellent

 

Did you know?

Of the estimated 2 million heroin users in the United States, 600,000–800,000 are considered hardcore addicts. Heroin addiction is considered to be one of the hardest addictions to recover from.

Did you know?

Every flu season is different, and even healthy people can get extremely sick from the flu, as well as spread it to others. The flu season can begin as early as October and last as late as May. Every person over six months of age should get an annual flu vaccine. The vaccine cannot cause you to get influenza, but in some seasons, may not be completely able to prevent you from acquiring influenza due to changes in causative viruses. The viruses in the flu shot are killed—there is no way they can give you the flu. Minor side effects include soreness, redness, or swelling where the shot was given. It is possible to develop a slight fever, and body aches, but these are simply signs that the body is responding to the vaccine and making itself ready to fight off the influenza virus should you come in contact with it.

Did you know?

Vaccines prevent between 2.5 and 4 million deaths every year.

Did you know?

People about to have surgery must tell their health care providers about all supplements they take.

Did you know?

According to the CDC, approximately 31.7% of the U.S. population has high low-density lipoprotein (LDL) or "bad cholesterol" levels.

For a complete list of videos, visit our video library