Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Please refer to the attached image for the question, and show work, Thanks in advance. 1 Question 1 Consider the United States and the countries
Please refer to the attached image for the question, and show work, Thanks in advance.
1 Question 1 Consider the United States and the countries it trades with the most (measured in trade volllme): Canada, Mexico, China, and Japan. For simplicity, assume these are the only four countries with which the United States trades. Trade shares aud exchange rates for these four countries are as follows: Country (currency ) Share of Trade Canada (dollar) Mexico (peso) China (yuan) Japan (yen) 36% 16% USD per FX in 2009 0.9225 0.0756 0.1464 0.0105 USD per FX in 2010 0.9643 0.0788 0.1473 0.0112 (a) Compute the percentage change from 2009 to 2010 in the four U.S. bilateral exchange rates (defined as U.S. dollars per units of foreign exchange, or FX) in the table provided. (b) Use the trade shares as weights to compute the percentage change in the nominal effective exchange rate for the United States between 2009 and 2010 (in U.S. dollars per foreign currency basket). (c) Based on your answer to (b), what happened to the value of the U.S. dollar against this basket between 2009 and 2010? How does this compare with the change in the value of the U -S. dollar relative to the Mexican peso? Explain your answer.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started