Really would apreciate some help on these questions thanks! 9. Other things the

Question

Really would apreciate some help on these questions thanks!

9. Other things the same, if the exchange rate changes from 6 Chinese yuan per dollar to 7 Chinese yuan per dollar, then the dollar (a) appreciates and buys more Chinese goods b) appreciates and buys fewer Chinese goods. (c) depreciates and buys more Chinese goods (d) depreciates and buys fewer Chinese goods 10. In France a loaf of bread costs 3 euros. In Great Britain a loaf of bread costs 4 pounds. If the exchange rate is .9 pounds per euro, what is the real exchange rate? (a) 4/2.7 loaves of British bread per loaf of French bread (b) 3.6/3 loaves of British bread per loaf of French bread (c) 3/3.6 loaves of British bread per loaf of French bread (d) 2.7/4 loaves of British bread per loaf of French bread

Explanation / Answer

Question 9

When one unit of a currency is able to purchase more units of foreign currency then it is said that currency has appreciated relative to foreign currency.

In given case, dollar is now able to purchase more number of Chinese Yuan.

So, dollar has appreciated.

This appreciation of dollar will enable the dollar to purchase more Chinese goods as Chinese goods will now be cheaper in terms of dollar.

Thus, the dollar appreciates and buys more Chinese goods.

Hence, the correct answer is the option (a).

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