1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
____ [38]
3 years ago
8

Consider relative purchasing power parity (PPP) and remember the consumer price index (CPI) provides the price level in a countr

y at any point in time. Assume CPI in the US is 165 in 2010 and 200 in 2015, and CPI in Canada is 170 in 2010 and 220 in 2015 (with base year as 2000). If the spot exchange rate was 0.7640 USD/CAD in 2010, what is it in 2015 if relative PPP holds
Business
1 answer:
pychu [463]3 years ago
4 0

Answer:

0.7156 USD/CAD

Explanation:

Relationship between relative PPP and inflation rates can be expressed as given below:

S(1)/S(0) = (1+I(y)) / (1+I(x))................(1)

==> S(0) = spot exchange rate at the beginning of the time period

==> S(1)  = spot exchange rate at the end of the time period

==> I(y) = expected inflation rate for country y, which is foreign country

==> I(x) = expected inflation rate for country x, which is domestic country.

Here, assumes that the US is a foreign country and Canada is domestic country

I(y) = (200/165) - 1 = 21.21%

I(x) = (220/170) - 1 = 29.41%

On putting the values of I(x) and I(y) in the first equation, we get:

S(1)/0.764 = (1+0.2121) / (1+0.2941)

S(1)/0.764 = 0.9366354996

S(1) = 0.764*0.936635

S(1) = 0.7156 USD/CAD

If relative PPP holds, the spot exchange rate in 2015 will be 0.7156 USD/CAD

You might be interested in
On july 1 of the current calendar year, plum co. paid $7,500 cash for management services to be performed over a two-year period
morpeh [17]

Dec 31              Management Services ....................................$1875

                           To Prepaid Expenses.....................................................$1875

(Being prepaid expenses recognised for the year)


6 0
3 years ago
Read 2 more answers
Explain why to maximize profits a firm needs to produce an output at a level where marginal revenue
Orlov [11]

Answer:

Rest of question:

... equals marginal cost.

Firms will maximize profits at the point where marginal revenue equals marginal cost because producing after this point means that no profits will be made.

As long as the Marginal revenue exceeds marginal cost, there will be profits made because the company is making more than it is spending so they should keep producing. When it gets to a point in production where the marginal revenue equals marginal cost, the company should not produce further than that.

This is because, as earlier mentioned, any further production would result in the marginal cost being larger than the marginal revenue which means that a loss will be made. The company should therefore stop at the point where MR = MC so as not to let MC get larger than MR so that no losses will be made.

8 0
2 years ago
Assume for Guatemala that the domestic price of coffee without international trade is higher than the world price of coffee. Thi
Marina CMI [18]

Answer:

other countries have a comparative advantage over Guatemala in the production of coffee, and Guatemala will import coffee. 

Explanation:

This question is incomplete. Please check the attached image for a complete question.

A country has comparative advantage in the production of a good or service If it produces the good or service at a lower opportunity cost when compared to its trading partners.

The price of Guatemala's coffee is higher when compared to the world price of coffee without international trade. It shows that Guatemala doesn't have a comparative advantage in the production of coffee. Guatemala should stop producing coffee and import instead. This would enable Guatemala focus more resocurces on the production of good for which it has comparative advantage.

I hope my answer helps you

3 0
3 years ago
Glinda goes to the supermarket for her monthly grocery shopping. As she waits in the line at the cash register, she sees her fav
ycow [4]

Answer:

<em><u>Convenience products.</u></em>

Explanation:

Convenience products are those goods or services that are purchased by the consumer with high frequency without comparison criteria or high purchasing efforts. These products are widely distributed so that the consumer has the availability of purchase at any time. Examples include magazines, fast food, detergents and beverages.

Some of its features are:

  • Low price,
  • Classified as non-durable goods,
  • High frequency of replacement at points of sale,
  • Easy replacement products
7 0
3 years ago
After reading the paragraph below, answer the question that follows. Americans spend up to $100 billion annually for bottled wat
saul85 [17]
141 gallons of bottles of water
6 0
3 years ago
Other questions:
  • Which of the following statements is CORRECT?a. An investment that has a nominal rate of 6% with semiannual payments will have a
    9·1 answer
  • Touching your nose is an example of?
    10·2 answers
  • The Oakland Mills Company has disclosed the following financial information in its annual reports for the period ending March 31
    15·1 answer
  • If the number of firms in an industry​ decreases, the supply curve will shift to the right. A. True B. False A change in which o
    13·1 answer
  • Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $92,30
    12·2 answers
  • A major reason outsourcing is effective is that a. few firms possess superior capability in all primary and support activities.
    6·1 answer
  • After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely econ
    15·1 answer
  • The Engine Division of MurphyMotor Corporation uses 5,000 carburetors per month in its production of automotive engines. It pres
    9·1 answer
  • True or False &amp; Why? “Every time price goes up, demand goes up and every time price falls, demand falls too, and so on ad in
    11·1 answer
  • Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amou
    8·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!