Calculate the real exchange rate from the us perspective

Assignment Help Macroeconomics
Reference no: EM132476359

Oranges are the only good produced in the US and Spain. 1 ton of oranges cost $310 in the US, and 200 Euros in Spain. The nominal exchange rate is $1.55 per euro.

a. Calculate the real exchange rate (E) from the US's perspective. Intuitively, what does this number represent?

b. Now suppose that one ton of oranges costs 150 Euros in Spain, and everything is the same as above. Explain if, and how you can make a profit in this situation. What would you expect to happen to the price of oranges in the US and Spain if other people also followed your strategy? Assuming that transportation costs are zero, and that all goods are tradable, what does this imply about the real exchange rate, E?

Reference no: EM132476359

Questions Cloud

Underlying both keynes and hayeck economic beliefs : What was the main difference between them? When and why did Kenes' ideas become popular and when and why did Hayeck's ideas become popular?
Items in our economy that lower our quality of life : Discuss 3 items in our economy that lower our quality of life even though they may increase GDP.
IMAT5209 Human Factors in Systems Design Assignment : IMAT5209 Human Factors in Systems Design Assignment Help and Solution, De Montfort University - Assessment Writing Service
Suppose central bank imposes expansionary monetary policy : How would this policy affect bond prices, interest rates, investment, the exchange rate, net exports, real GDP, and the price level? Show your results graphical
Calculate the real exchange rate from the us perspective : Calculate the real exchange rate (E) from the US's perspective. Intuitively, what does this number represent?
What is the price level-what is the velocity of money : Problem: Suppose that this year's money supply is $500 billion, nominal GDP is $10 trillion, and real GDP is $5 trillion.
Conclude the standard of living for south koreans : Describe the two other pieces of information you would need to conclude the standard of living for South Koreans also increased by 6%.
Create general journal entries to record the transaction : Create general journal entries to record the transaction. Maverick Ltd issued a prospectus to the public offering 10 million shares at $1.50 each on 1 July 2018
Explain using the definition of m1 and m2 : Why is M2 sometimes a more stable measure of money than M1? Explain using the definition of M1 and M2.

Reviews

Write a Review

Macroeconomics Questions & Answers

  What is the maximum amount that sita would pay

Sita expects her future earnings to be worth Rs. 100. If she falls ill, her expected future earning will be Rs 25. What is the maximum amount that Sita would pay for the insurance

  Market for loanable funds-market for foreign-currency

1) Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.

  What are the primary functions of the fed?

What are the primary functions of the Fed?

  Discuss two areas of the united states economy

From the scenario, discuss two areas of the United States economy that Ronald Reagan deregulated in the eighties.

  What weapons are used most often in the commission of crime

Excel: For each of the letters on the next page, create one graph in Excel. Use a separate Excel spreadsheet for each letter. Construct graphs from the data.

  Why do we have trade barriers

Tariff and non tariff barriers exist in all nations, either independently or as part of a multicountry integrated economy. Present arguments that defend the use of trade barriers and arguments against the use of trade barriers.

  Fiscal stimulus and multiplier effect

If the desired fiscal stimulus is $20 billion and the desired AD increase is $50 billion, we can conclude that the MPC is:

  Focus for the application of macroeconomic ideas

Identify and briefly describe the organization, D.R. Horton. Explain why this will be an interesting focus for the application of macroeconomic ideas.

  Supply and demand functions

Use the following supply and demand functions to answer the questions below:

  Stabilize the business cycle over time

Prevent the occurrence of contractions in output and employment if used sensibly,such as following a fixed monetary growth rate rule 5.stabilize the business cycle over time

  What is the contribution margin

The firm allocates only variable overhead costs to each product based on direct labor hours. What is the contribution margin for each product?

  Draw an as-ad diagram

Draw an AS/AD diagram which shows what happens if strong growth in AD has pushed actual RGDP to a level above potential (full employment) RGDP.

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