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Economics
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21 Oct 2020

Find the real exchange rate if the Nominal exchange rate is 70 Yen per dollar, the domestic price is $80 per bushel of corn and the Foreign price being 19000 Yen per bushel of corn.

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Darryn D'Souza
Darryn D'SouzaLv10
21 Oct 2020

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Related questions

Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar.

(a) Explain how you could make a profit from this situation. What would be your profit per bushel of rice? If other people exploit the same opportunity, what would happen to the price of rice in Japan and the price of rice in the United States

(b) Suppose that rice is the only commodity in the world. What would happen to the real exchange rate between the United States and Japan?

Assume that American rice sells for $100 per bushel, Japanese rice sells for 16,000 yen per bushel, and the nominal exchange rate is 80 yen per dollar.          

  1. Explain how you could make a profit from this situation. What would be your profit per bushel of rice? If other people exploit the same opportunity, what would happen to the price of rice in Japan and the price of rice in the United States?
  2. Suppose that rice is the only commodity in the world. What would happen to the real exchange rate between the United States and Japan?

Suppose that corn currently costs $4.00 per bushel and that wheat currently costs $3.00 per bushel. Also assume that the price elasticity of corn is 0.15, while the price elasticity of wheat is 0.20. For the following questions about elasticities, simply use the percentage changes that are provided rather than attempting to calculate those percentage changes yourself using the midpoint formula.

Instructions: In parts a and b, round your answers to 2 decimal places. In part c, round your answers to 1 decimal place.

a. If the price of corn fell by 25 percent to $3.00 per bushel, by what percentage would the quantity demanded of corn increase? percentage?

What if the price of corn fell by 50 percent to $2.00 per bushel? Percentage?

b. To what value would the price of wheat have to fall to induce consumers to increase their purchases of wheat by 5 percent? $ per bushel.

c. If the government imposes a per-bushel tax on corn of $0.40 so that the price of corn rises by 10 percent to $4.40 per bushel, by what percentage would the quantity demanded of corn decrease? Percentage?

If the initial quantity demanded is 10 billion bushels per year, by how many bushels would the quantity demanded decrease in response to this tax? Million bushels.

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