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1. Suppose that you are a U.S. citizen considering going on vacation abroad and that the euro has appreciated by 15% with respect to the

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1. Suppose that you are a U.S. citizen considering going on vacation abroad and that the euro has appreciated by 15% with respect to the U.S. dollar. Would you be more or less willing to visit Rome and Paris? 2. "A country is always worse off when its currency is weak (falls in value)." Is this statement true, false, or uncertain? Explain your answer. 3. A German sports car is selling for 70,000 euros. What is the dollar price in the United States of the German car if the exchange rate is 0.90 euro per dollar? 4. Go to the St. Louis Federal Reserve FRED database and find data on the exchange rate of U.S. dollars per British pound (DEXUSUK). A Mini Cooper can be purchased in London, England, for 17,865 or in Boston, United States, for $23,495. a. Use the most recent exchange rate available to calculate the real exchange rate of the London Mini per Boston Mini. b. Based on vour answer to part (a) are 0 a. Use the most recent exchange rate available to calculate the real exchange rate of the London Mini per Boston Mini. b. Based on your answer to part (a), are Mini Coopers relatively more expensive in Boston or in London? C. What price in British pounds would make the Mini Cooper equally expensive in both locations, all else being equal? 5. If American auto companies make a breakthrough in automobile technology and are able to produce a car that gets 200 miles to the gallon, what will happen to the U.S. dollar exchange rate? 1:21 PM

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