Please read the following information and answer the associated question(s). Exchange Rate Changes - Charles has difficulty determining the impact of exchange rate changes on international trade. His friend, Shanitha, told him to focus on how the changes impact the price of goods in each currency. She offered the following example to help Charles. Initially, the Dollar/Euro ($/) exchange rate is 1.25 (it takes $1.25 to buy 1 Euro). This equivalent to listing the Euro/Dollar (C/$) exchange rate as 0.80 [Calculation: Euro/Dollar = 1/($/) = (1/1.25) = 0.80). Intel is a large U.S. manufacturer of computer chips that exports products to Europe. The Euro price per chip is set so that Intel will receive $300 when the Euros are converted into Dollars. Euro Price = $300 X (/$) = $300 X (C0.80/$1) - 240 per chip BMW is a large European car manufacturer that exports vehicles to the U.S. BMW sets the Dollar price for the 330i sedan to receive 40,000 Euros per car. Dollar Price = 640,000 X ($/) = 40,000 X ($1.25/61) = $50,000 per car Suppose the Dollar appreciates (strengthens) relative to the Euro (this is the same as saying the Euro depreciates (weakens) relative to the Dollar). In other words, it now takes less Dollars to buy one Euro. The new Dollar/Euro ($/) exchange rate changes to 1.10 (which means the new Euro/Dollar (/$) exchange rate is now 1/1.10 = 0.9091). Intel must increase the price of its computer chips in Euros to keep receiving $300 per chip. New Euro Price = $300 X (/S) = $300 X (0.9091/$1) = 272.73 per chip Intel's chips are now more expensive in Euros. . It is likely that European customers will look for less expensive chips from other suppliers and will buy fewer chips from Intel. BMW can instead lower their car's price in Dollars and still receive 40,000 Euros per car. New Dollar Price = 40,000 X ($/) = 640,000 X ($1.10/C1) - $44,000 per car BMW's vehicle is now less expensive in U.S. Dollars. It is likely that BMW will sell more vehicles in the U.S. since their cars are less expensive in comparison to other vehicles. Shanitha offered one last important point. "If the Dollar appreciates relative to the Euro, all U.S. goods would be more expensive in Euros, and all European goods would be less expensive in Dollars. The result could be a drastic impact on imports and exports for both countries." Shanitha asked Charles to answer the following question(s) to test his understanding. Question 1 (2 points) Listen 1. The U.S. Dollar ($) to U.K. Pound () exchange rate was recently $1.40/1. However, due to several events, the Dollar has begun to depreciate (weaken) relative to the Pound and the exchange rate is expected to change to $1.50/1. If the Dollar does depreciate relative to the Pound, it is likely that: 1. The U.S. Dollar ($) to U.K. Pound () exchange rate was recently $1.40/1. However, due to several events, the Dollar has begun to depreciate (weaken) relative to the Pound and the exchange rate is expected to change to $1.50/1. If the Dollar does depreciate relative to the Pound, it is likely that: U.S exports to the U.K. would increase since U.S. goods would be less expensive in Pounds. U.S. imports from the U.K. would increase since U.K. goods would be more expensive in Dollars. U.S. exports to the U.K. would be unaffected by the exchange rate change. None of the above are likely to be true. Question 2 (2 points) 4. Listen 2. If the U.S. dollar strengthens (appreciates) in value relative to the Japanese Yen (it takes less dollars to buy yen), then it is likely that: U.S. exports to Japan will decrease AND imports into the U.S. from Japan will increase U.S. exports to Japan will increase AND imports into the U.S. from Japan will decrease U.S. exports to Japan will decrease AND imports into the U.S. from Japan will also decrease