After graduation you decide to treat yourself with a nice European trip. You wan

Question

After graduation you decide to treat yourself with a nice European trip. You want to go to Great Britain, France. Italy, and Ukraine. Make sure to show your work for this problem and site all the internet resources you used. You just arrived to London and you are hungry for some English breakfast. You decide to eat at the first restaurant you see. 2 eggs with black pudding, beans and a toast cost pound 12 (British pounds). Find the current exchange rate between British pound and U.S. dollar and calculate how much this breakfast will cost you in U.S. dollars? You had great time in GB and now it's time to go to Paris, France. When you arrive to Paris you notice that beer there cost in 6, and you remember it costing you pound 4 in England. Find the exchange rate between U.S. dollar and Euro and calculate how much this beer will cost you in $. Calculate how much British beer costs you in $ using exchange rate from problem a). Compare the prices of beer in Paris and London. Next stop - Italy. Mi amore! Well, the love stops right there. Once you see the price of their pizza, you no longer think that Dominos is bad for you. Really, to pay $30 for pizza!??? It's ridiculous! Well, if the pizza in Italy cost you equivalent of $30, how much did it cost you in euros (assume exchange rate is the same as in part b)? Finally, Ukraine. Where beer cost UAH 20 (Ukrainian currency is hryvnia), where haircuts cost UAH 50, and a pair of Nikc's jeans cost UAH 6000. Find the current exchange rate between U.S. dollar and Ukrainian Hryvnia and calculate how much beer, haircut, and a pair of jeans cost in Ukraine? Compared to US prices, the beer is cheaper in which country? The haircuts arc cheaper in which country? The jeans are cheaper in which country? Explain in your own words w hat purchasing power parity theory tells us and why it did not hold in the examples from part d).

Explanation / Answer

a)18.21 dollars

b)1 us dollar=0.91 euro

French beer costs 6.61 dollar

British beer costs 6.07 dollar

c)30 dollars=27.25 euros

d)

exchange rate=1 Ukrainian Hryvnia equals

0.044 US Dollar

so,6070 Ukrainian Hryvnia equals

265.516 US Dollar

e)Purchasing power parity conversion factor is the number of units of a nations's currency needed to purchase the same amount of goods and services in the domestic market as a U.S. dollar would buy in the United States

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