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the exchange rate between the euro and the British pound

1. The following table lists the stages required in the production of a personal computer. What is the value of the computer in the GDP?

Stage Value Added

Components manufacture $50
Assembly $250
Wholesaler $500
Retailer $1500

2. What is the GDP for this economy?

3. What is the GNP for this economy?

4. What is the NNP for this economy?

5. What is the national income for this economy?

6. What is the gross investment in this economy?

7. The U.S. dollar price of a Swedish krona changes from $.1572 to $.1730

(a) Has the dollar depreciated or appreciated against the krona?

(b) Has the krona appreciated or depreciated against the dollar?

8. Suppose the U.S. dollar price of a British pound is $1.50; the dollar price of a euro is $.90; a hotel room in London, England, costs 120 British pounds; and a comparable hotel room in Hanover, Germany costs 220n euros.

(a) Which hotel room is cheaper to a U.S. tourist?
(b) What is the exchange rate between the euro and the British pound?

Solution Preview

1. The following table lists the stages required in the production of a personal computer. What is the value of the computer in the GDP?

Stage Value Added
Components manufacture $50
Assembly $250
Wholesaler $500
Retailer $1500
If all the dollar amounts in the table are value added only, then the GDP is simply the sum of all these amounts, assuming the components are domestically produced and assembled. Then the value of the computer in the GDP = 50 + 250 + 500 + 1500 = $2300.

2. What is the GDP for this economy?
It is a little unclear whether this part follows the first part or not. I assume that it does. Please feel free to let me know if you have additional information for this question.
GDP is the total value added ...

Solution Summary

The exchange rate between the euro and the British pound is determined.

$2.19