Calculate the dollar exchange rate, International Economics

Assignment Help:

Assume the United States exports 1000 computers at a price of $3000 each and imports 15 UK autos at a price of 10000 pounds each. Assume that the dollar/pound exchange rate is $2 per pound.

a. Calculate in dollar terms, the US export receipts, import payments and trade balance prior to a depreciation in the dollar's exchange rate.

b. Suppose the dollar's exchange value depreciates by 10%. Assuming that the price elasticity of demand for US exports equals 3.0 and the price elasticity of demand for US imports equals 2.0, does the dollar depreciation improve or worsen the US trade balance? Why?

c. Now assuming that the price elasticity of demand for US exports equals 0.3 and the price elasticity of demand for US imports equals 0.2. Does this change the outcome? Why?

 


Related Discussions:- Calculate the dollar exchange rate

ECONOMICS, In the Ricardian analysis, why does each trading partner have an...

In the Ricardian analysis, why does each trading partner have an incentive to produce at an endpoint of its production-possibility frontier? Why are prices of factors of production

Suppose governments offer subsidy, Q. Suppose both governments offer their...

Q. Suppose both governments offer their respective company a $10 million subsidy. Answer: Mutually companies would enter the market as each one knows that regardless of the o

Analyze the effects of an increase in the u.s. money supply, Q. Using a fig...

Q. Using a figure describing both the U.S. money market and the foreign exchange market, analyze the effects of an increase in the U.S. money supply on the dollar/euro exchange rat

Show temporarily monetary expansion, Q. Using a figure, show that under ful...

Q. Using a figure, show that under full employment, a temporary fiscal expansion would increase output (over-employment) but cannot increase output in the long run. Answer: A t

Discuss the different types of letters of credit, Q. Discuss the different ...

Q. Discuss the different types of Letters of credit? Types: i. Revocable Letter of credit ii. Irrevocable Letter of credit iii. Deferred payment Letter of credit iv. Confirmed

Policy tool under fixed exchange rates, Q. "A monetary policy is not ...

Q. "A monetary policy is not a policy tool under fixed exchange rates." Discuss. Answer: It is True Under fixed exchange rates domestic asset transactions by the centr

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd