As the French franc appreciates in value relative to the U.S. dollar, what happens to the price of U.S. goods in France? What happens to the price of French goods in the U.S.?
Suppose the Canadian dollar (C$) price of one British pound is C$2.414. A hotel room in London costs 110 pounds, while a similar hotel room in Toronto costs C$260. In which city is the hotel room cheaper, and by how much?
The nation of Turkovakia produces only turkeys. In 2000, turkey was priced at $6 per unit. In 2005, turkey was priced at $12 per unit. If 2005 is the base year, then the price index for 2000 is
N. Kamazoon can produce the combo of 18 televisions and 24 widgets with its stock of resources. S. Kamazoon can produce 15 televisions and 15 widgets with its resources. Explain why this information does not allow you to establish limits on the terms of trade between these two countries
1. As the French Franc appreciates in value relative to the US dollar US goods become cheaper in France and French goods become costlier in the U.S.
This can be shown using a simple hypothetical example. Suppose before appreciation each U.S. dollar is equivalent to 1 French franc. Consider two cars: one made by GM in the U.S., and another made by Renault in France. Suppose the cars cost $10000 and 10000 Francs respectively. Before appreciation (assuming away tariffs and ...
The solution assists with finding the opportunity cost.