Suppose that there is a French shipbuilder that imports American made aluminum for parts in its ships. The French shipbuilder ne
eds 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
1 answer:
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
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