Problem 17-10 Results of Exchange Rate Changes In 1983 the Japanese yen-U.S. dol
ID: 2726745 • Letter: P
Question
Problem 17-10
Results of Exchange Rate Changes
In 1983 the Japanese yen-U.S. dollar exchange rate was 240 yen per dollar, and the dollar cost of a compact Japanese-manufactured car was $8,250. Suppose that now the exchange rate is 108 yen per dollar. Assume there has been no inflation in the yen cost of an automobile so that all price changes are due to exchange rate changes.
Has the price (in dollars) of the automobile increased or decreased since 1983 because of changes in the exchange rate?
-Select-IIIIIIIVVItem 1
I. The automobile's value has decreased because the dollar has increased in value relative to the yen.
II. The automobile's value has no relation to the relative value of the dollar and the yen.
III. The automobile's value has increased because the dollar has declined in value relative to the yen.
IV. The automobile's value has decreased because the dollar has declined in value relative to the yen.
V. The automobile's value has increased because the dollar has increased in value relative to the yen.
What would the dollar price of the car be, assuming the car's price changes only with exchange rates? Round your answer to the nearest dollar.
$
Explanation / Answer
Correct answer is option D)
The automobile's value has decreased because the dollar has declined in value relative to the yen.
Price of the car $8,250 exchange rate 240 Price of the car in yen 1,980,000 Current exchange rate 108 Price of the car in yen 891,000