Assume the United States has the following import/export volumes and prices. It undertakes a major devaluation of
Question:
Assume the United States has the following import/export volumes and prices. It undertakes a major "devaluation" of the dollar, say 18% on average against all major trading partner currencies. What is the pre-devaluation and post-devaluation trade balance?
Initial spot exchange rate ($/fc)...........................2.00
Price of exports, dollars ($)............................20.0000
Price of imports, foreign currency (fc)...............12.0000
Quantity of exports, units..................................100
Quantity of imports, units..................................120
Percentage devaluation of the dollar.................18.00%
Price elasticity of demand, imports.....................-0.90
Exchange RateThe value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
Step by Step Answer:
Givem Data Assumptions Values Initial spot exchange rate fc 2...View the full answer
Fundamentals of Multinational Finance
ISBN: 978-0205989751
5th edition
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
