Nissan produces a car that sells in Japan for 1.8 million. On September 1, the beginning of
Question:
Nissan produces a car that sells in Japan for ¥1.8 million.
On September 1, the beginning of the model year, the exchange rate is ¥150:$1. Consequently, Nissan sets the U.S. sticker price at $12,000. By October 1, the exchange rate has dropped to ¥125:$1. Nissan is concerned because it now receives only $12,000 × 125 = ¥1.5 million per U.S. sale.
a. What scenarios are consistent with the U.S. dollar's depreciation?
b. What alternatives are open to Nissan to improve its situation?
c. How should Nissan respond in this situation?
d. Suppose that on November 1, the U.S. Federal Reserve intervenes to rescue the dollar, and the exchange rate adjusts to ¥220:$1 by the following July. What problems and/or opportunities does this situation present for Nissan and for General Motors?
The 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:
a Any model of exchange rate determination may be applied here In a monetary model this would include a relative increase in the US money supply or velocity a relative decrease in US income or the exp...View the full answer
