Question 7

6. Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 3, 2019, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Cost of One Unit of Foreign Currency Foreign Currency (Dollars) Brazilian real (BRL) 0.3329 Canadian dollar (CAD) 0.7176 Euro (EUR) 1.129 Japanese yen (JPY) 0.008398 Mexican peso (MXN) 0.0934 United Kingdom pound (GBP) 1.603 Suppose that on November 3, 2019, a mahogany longcase clock handmade in Brazil is priced at BRL 9,030. The approximate U.S. dollar price of the clock would be If the nominal exchange rate for the U.S. dollar-British pound falls from $1.603 to $1.20225 per British pound, the British pound in value, or , relative to the U.S. dollar. Grade It Now Save & Continue7. Computing real exchange rates Suppose a fixed basket of consumer goods that costs $18 in the United States costs JPY 570 in Japan. Under a constant cost of the basket in each country, compute the real exchange rates produced by the two nominal exchange rates given in the following table. Cost of Basket in U.S. Cost of Basket in Japan Nominal Exchange Rate Real Exchange Rate (Dollars) . (Yen) . (Yen per dollar) (Baskets of Japanese goods per basket of U.5. goods) 18 570 95.00 18 570 76.00 Conrner Jl e e N