12. Suppose you want to buy a car. You either want to buy a Chevrolet for US$ 15,000, a Volkswagen for ? 8,900, a Honda for 1 million or a Hyundai for 21 million Korean won. The following exchange rates are given 1A Which car is cheapest when all prices are expressed in American dollars? 1B Do relative prices change when expressed in European euros? Explain why this is the case. 1C Which currency has to appreciate for the cheapest car to become more expensive? 1D Which currencies have to depreciate for the cheapest car to become more expensive?

Foreign currency per dollar Foreign currency per euro American dollar 1.0 1.3 European euro 0.8 1.0 Japanese yen 106.0 135.9 Korean won 1 120.9 1437.1 n