Suppose that the current Canadian dollar (CAD) to U.S. dollar exchange rate is $

Question

Suppose that the current Canadian dollar (CAD) to U.S. dollar exchange rate is $0.80 CAD = $1 US and that the U.S. dollar price of an Apple iPhone is $280.

Instructions: In part a, enter your answer as a whole number. In part b, round your answer to 2 decimal places.

a. What is the Canadian dollar price of an iPhone? $ CAD.

b. Next, suppose that the CAD to U.S. dollar exchange rate moves to $0.92 CAD = $1 US.

What is the new Canadian dollar price of an iPhone? $ CAD.

c. Other things equal, would you expect Canada to import more or fewer iPhones at the new exchange rate? (Click to select)FewerMore.

Explanation / Answer

a) $ 0.80 CAD = $1 U.S.

Therefore, if price of iPhone is $280, then $280/.80 = $350 CAD is required.

b) New CAD = $280/.92= $304.35 CAD

c) Canada will import more iPhones as CAD has appreciated ( increased in value) against the $ US.

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