Plan a vacation in london

Assignment Help Macroeconomics

Reference no: EM133439493

Question: Suppose you live in the United States and plan a vacation in London. You want to find the least expensive airfare, so you request quotes from Independence Airline (a U.S. airline) and Queen's Airways (a U.K. airline). The following table shows the quoted prices in national currencies. Suppose that the current exchange rate is 1.88 $/£.

Airline Price
Independence Airline $900
Queen's Airways £550
To compare the prices of the two tickets, you need to express them in a common currency. The price of the Queen's Airways ticket in dollars is $__________

Therefore, the (independence airline or Queen's airline) ticket is cheaper for you to buy.

Your friend travels to London a month later. At the time he buys his ticket, the prices quoted by the two airlines are the same as before, but the exchange rate has fallen to 1.58 $/£. Assuming that your friend is looking for the least expensive deal, he will travel with (independence airline or Queen's airline)

In this scenario, the U.S. dollar (appreciated or depreciated) against the British pound. As a result, the dollar price of an airplane ticket sold by a U.K. company (rose or fell). Since the same logic applies to other goods and services, you can say that U.K. goods and services became (less or more) expensive to U.S. consumers.

Reference no: EM133439493

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