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Exchange Rate Changes

Early in September 1983, it took 245 Japanese yen to equal $1. More than 20 years later that exchange rate had fallen to 108 yen to $1. Assume the price of a Japanese-manufactured automobile was $8,000 in September 1983 and that its price changes were in direct relation to exchange rates.
a. Has the price, in dollars, of automobile increased or decreased during the 20-year period because of changes in the exchange rate?
b. What would the dollar price of the car be, assuming the car's price changes only with exchange rates?

Solution Preview

Early in September 1983, it took 245 Japanese yen to equal $1. More than 20 years later that exchange rate had fallen to 108 yen to $1. Assume the price of a Japanese-manufactured automobile was $8,000 in September 1983 and that its price changes were in direct relation ...

Solution Summary

The solution considers the effect of Yen-dollar exchange rate changes on the dollar price of a car.

$2.19