Author Question: How can changes in the market price of wealth previously acquired alter a country's net foreign ... (Read 118 times)

luvbio

  • Hero Member
  • *****
  • Posts: 623
How can changes in the market price of wealth previously acquired alter a country's net foreign wealth?
 
  What will be an ideal response?

Question 2

Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 100 euros and the representative U.S. basket costs 125,
 
  and the dollar/euro exchange rate is 0.75 per euro, then the price of the European basket in terms of U.S. basket is:



snackralk

  • Sr. Member
  • ****
  • Posts: 363
Answer to Question 1

When Japan's stock market lost value in the 1990s, American and European owners of Japanese asset lost value in their claims, while Japan's net foreign wealth increased. Similarly, exchange rate changes can have this effect. When the dollar depreciates against foreign currency, foreigners who hold dollar assets will see their wealth fall when measured in their home currencies.

Answer to Question 2

(0.75 /euro) (100 euro per a European basket)/(125 /U.S. basket) = 0.60 U.S. baskets/European basket.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question


 

Did you know?

Adults are resistant to the bacterium that causes Botulism. These bacteria thrive in honey – therefore, honey should never be given to infants since their immune systems are not yet resistant.

Did you know?

Drugs are in development that may cure asthma and hay fever once and for all. They target leukotrienes, which are known to cause tightening of the air passages in the lungs and increase mucus productions in nasal passages.

Did you know?

Though the United States has largely rejected the metric system, it is used for currency, as in 100 pennies = 1 dollar. Previously, the British currency system was used, with measurements such as 12 pence to the shilling, and 20 shillings to the pound.

Did you know?

Approximately 500,000 babies are born each year in the United States to teenage mothers.

Did you know?

Asthma occurs in one in 11 children and in one in 12 adults. African Americans and Latinos have a higher risk for developing asthma than other groups.

For a complete list of videos, visit our video library