In which country is the automobile less expensive

Assignment Help Business Economics

Reference no: EM131094558

Suppose that an automobile costs $30,000 in the United States and 25,000 Euros in France. Further suppose that the exchange rate is .8 (one US dollar = .8 Euros)

a. What is the real exchange rate? ____________ b. In which country is the automobile less expensive? ____________ c. Do your answers suggest that the US will have a trade surplus or a trade deficit with France? ____________ d.

Does you answer to c suggest that US citizens will be borrowing money from France or lending money to France? ____________ e.

Given the prices of the automobiles in France and the United States, what should the nominal exchange rate be in order to have purchasing power parity.

Reference no: EM131094558

Questions Cloud

What is present value of after-tax net returns for system : Mr. Agirich of Aggie Farms must choose between two alternative machinery investment programs which will perform equally. The following information is available. What are the annual gross revenues from System A in the 5th year? What is the present val..

Calculate quantity supplied and quantity demanded : The market for a box of POG’s is defined by Qd=80-P and Qs=P. Calculate perfectly competitive equilibrium, consumer surplus, and producer surplus. Calculate quantity supplied, quantity demanded, and producer surplus, consumer surplus, and deadweight ..

Short-run and long-run expansion path : Consider the production function when needed for the following questions. Wage is $20 and rent is $10. Justify your answers. Labor is no longer fixed. Minimize expenditure to produce 40 units. Using a-d above, graph your results along with the short-..

Expressions for marginal product of labor and capital : If labor and capital (inputs) are perfect complements in production, but 4 units of labor are needed per unit of capital, find the production and cost functions. Find the cost function for the general form of perfect complements, f(L, k) = min{aL, bk..

In which country is the automobile less expensive : Suppose that an automobile costs $30,000 in the United States and 25,000 Euros in France. Further suppose that the exchange rate is .8 (one US dollar = .8 Euros) What is the real exchange rate? In which country is the automobile less expensive?

What are the equilibrium values of the real wage : Suppose all workers value their leisure at at 90 goods per day. The production function relating output per day to the number of people working per day (L) is: Assume there are no taxes. What are the equilibrium values of the real wage, employment an..

Find the substitution-income and total effects on demand : A consumer has utility function given by u(x_1, x_2) = Squarerootx_1x_2. Suppose the price of good 1 falls from $5 to $2. while the price of good 2 and the consumer's income remain constant at $10 and $100, respectively. Find the substitution, income..

Consumer has utility function : A consumer has utility function given by u(x_1, x_2) = Squarerootx_1x_2. Suppose the price of good 1 falls from $5 to $2. while the price of good 2 and the consumer's income remain constant at $10 and $100, respectively. Find the substitution, income..

Withdraw fixed amount from this savings account : Mr. Diamond expects to invest $1000 per year for each of the next 20 years in an investment plan that pays 10% per year, compounded annually. At the end of the 20th year, he expects to withdraw the balance in his investment plan and deposit it in a s..

User Account

All Pages