Assume for the moment that the exchange rate X is one U.S, dollar was equivalent

Question

Assume for the moment that the exchange rate X is one U.S, dollar was equivalent to two British pounds Suppose that British firms are willing to sell wool sweaters in the United States provided they receive 40 pounds per sweater in retum. U.S. firms are willing to sell rollerblades in England as long as they receive $60 per pair in return. (Assume that shipping and handling costs are negligible). 15. Suppose that you wished to purchase an imported British wool sweater. At X exchange rates given above, how many U.S. dollars would this cost? answer sheet 16. How many British pounds would a citizen of Great Britain have to exchange for U.S, dollars in order to purchase American-made rollerblades?answsr sheet Suppose that events caused the exchange rate to change so that one U.S. dollar became the equivalent to 1.5 British pounds. 17. Is this an example of the U.S. dollar appreciating or depreclating relative to the British pound? -answer sheet 18.Looking at your what your answers would be to questions (17) and (18) using the new exchange rate, answer the following: U.S.-made products are now cheaper/more expensive (chose one- answer sheet) to British consumers. British products are now cheaper/more expensive (chose one- answer sheet) to U.S. consumers. 19. Which group would you expect to benefit more from this change in exchange rates (chose a or b and put answer on answer sbeet: (a) U.S. rollerblade manufacturers and their workers that Export to England. (b) British sweater manufacturers and their workers that Export to U.S. n your 20. Explain: answer sheet s before 4,000 art), how wer Part 3 All answers go on ANSWER KEY above. Please go to the website www.Europa.eu to answer the following: er sheet 21 month? How many European Union members are there as of this Answer ng phase 22. currency as of this month? Answer How many countries have adopted the Euro as their f dollars ort or 23. List the countries within the European Union that have chosen (as in their choice )not to use (chosen is different from not being allowed to use) the Euro as their currency s (chose

Explanation / Answer

Given 1 dollar = 2 pounds , This implies 1 pound = 1/2 =0.5 dollar

15) Cost in pounds = 40. At X 1 pound = 0.5 dollars.

Cost in dollars = 0.5*40 = $20

16) cost in dollars = 60. Cost in pounds = 60*2 =120pounds.

17 US dollar is depreciating because now you have to give more dollars per pound.

18 US products are now cheaper and British products are expensive.

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