Question

Suppose that there is a French shipbuilder that imports American made aluminum for parts in its ships. The French shipbuilder needs to purchase aluminum from the American producer for $100,000. Question: At the equilibrium exchange rate, how much does it cost to purchase $100,000 worth of aluminum from the American producer

Answer 1

Answer:

€67,000

Explanation:

The computation o the cost is shown below:

But before that first we have to determine the exchange rate at which the quantity demanded equal to quantity supplies

As we can see that from the table  $1.5 per euro exchange rate, the quantity demanded equal to quantity supplied

That means € 1 = $ 1.5

So,  

$1 = € 1 ÷ 1.5

So,

Euro exchange rate = €0.67 per dollar

Now

Worth of exchange  is

= $100,000 × € 0.67 per dollar

= €67,000