Author Question: Fixed and Floating Exchange RatesExchange rate ($/)Quantity of euros () demandedQuantity of euros () ... (Read 44 times)

gboileau · **on:** Nov 23, 2022

Question 1

Purchasing Power Parity

If the average price of a Starbucks Venti Caffe Mocha is $4.50 in the United States and is 120 baht in Thailand, then the implied exchange rate between the Thai baht and the U.S. dollar is ________ baht per dollar.
◦ 4.50
◦ 26.67
◦ 120
◦ 0.04

Question 2

Fixed and Floating Exchange Rates

Exchange rate ($/€)	Quantity of euros (€) demanded	Quantity of euros (€) supplied
1.40	300	440
1.15	370	370
0.90	440	300

Quantities represent millions of euros traded per day.
Refer to the data in the table. The equilibrium exchange rate is $1.15/euro. Suppose the European Central Bank pegs its currency at $1.40/euro. At the pegged exchange rate, there is a ________.
◦ shortage of euros equal to 300 million
◦ shortage of euros equal to 70 million
◦ surplus of euros equal to 440 million
◦ surplus of euros equal to 140 million

Sha · **Reply #1 on:** Nov 23, 2022

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