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Business & Marketing
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The Foreign Exchange Problems Business & Marketing Essay
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Please read the ppt and answer the IBUS 300 Problem Set. The total is six big questions. Please write the answers one by one under the questions. Do not write them in the form of an essay.
IBUS 300 Problem Set
1. a. If the exchange rate changes from $1.70 per British pound (₤1) to $1.68
per ₤1, has the pound (₤) appreciated or depreciated? Has the dollar appreciated or depreciated?
b. What happens to the ₤-price that British residents pay for a $500 U.S.
export good due to the exchange rate change above?
c. What happens to the $-price that U.S. residents pay for a ₤1200 import
good from Britain?
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INSTRUCTOR
COURSE
DATE
Question 1
a) The Pound (£) depreciated while dollar ($) appreciated
b) The price rises from 294.12 Pounds to 297.62 Pounds as the $ appreciation increases the price of the U.S. exports.
c) The price goes down from $2040 to $2016 as the dollar appreciation lower the price of U.S. imports.
d) U.S. exporters sell less due to the consequent price change and of course suffer a damage and the importers will get an advantage from this case as they have to pay less for their imports (Deutsch, et.al, 393).
Question 2
a) The Pound appreciated while dollar experienced depreciation
b) The £ price reduces from 294.12 Pounds to 290.70 Pounds as $ depreciation lowers the price of U.S exports.
c) The £ price rises from £2040 to £2064 as $ depreciation raises the price of imports.
d) U.S. exporters will have advantage and sell more, whereas U.S. importers will pay higher prices thereby suffering a detriment.
Question 3
a) The appreciation will be seen as a bad thing since the U.S. business will pay $12,000 after the euro appreciation in...
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