Question

The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table presents nominal exchange rate data for November 26, 2014, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow.
Foreign Currency Cost of one unit Foreign Currency

Brazilian real (BRL) 0.5148
Canadian dollar (CAD) 0.9213
Euro (EUR) 1.3457
Japanese yen (JPY) 0.008226
Mexican peso (MXN) 0.0926
United Kingdom pound (GBP) 1.9695

Suppose that on November 26, 2014, a marble statue handmade in Canada is priced at CAD 1,700. The approximate U.S. dollar price of the statue would be_______ . If the nominal exchange rate for the U.S. dollar–euro rises from $1.3457 to $1.547555 per euro, the euro_______ in value, or_________ , relative to the U.S. dollar.

Answer 1

Answer:

Approximate price of marble statue in USD is:

= Price of statue * Foreign Currency Cost of one unit

= 1,700 * 0.9213

= US$‭1,566.21‬

If the nominal exchange rate for the U.S. dollar–euro rises from $1.3457 to $1.547555 per euro, the euro appreciated in value, or appreciated, relative to the U.S. dollar.

If this direct rate increases from $1.3457 to $1.547555 per euro, it means that one Euro can now buy more dollars than before which means that it gained/ appreciated in value relative to the USD.

For instance: Before the change, €10 = 10 * 1.3457 = $10.3457

After the change, €10 = 10 * 1.547555 = 10.547555

Euro therefore became stronger relative to the USD.