Pricing foreign goods The nominal exchange rate is the price of one currency in

Question

Pricing foreign goods The nominal exchange rate is the price of one currency in terms of another currency. A nominal exchange rate specifies how many units of one country's currency are needed to buy one unit of another country's currency. Suppose the following table forecasts nominal exchange rate data for June 13, 2016, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Foreign Currency Cost of One Unit of Foreign currency (Dollars) Lithuanian litas (LTL) 0.3666 Canadian dollar (CAD) 0.8493 Euro (EUR) 1.3288 Japanese yen (JPY) 0.009748 Mexican peso (MXN) 0.0089 United Kingdom pound (GBP) 1.8965 Suppose that on June 13, 2016, an ornamental bookcase handmade In Canada is priced at 1,180 CAD. The approximate U.S. dollar price of the bookcase would be_________If the nominal exchange rate for the U.S. dollar-Japanese yen falls from $0.009748 to $0.0082858 per Japanese yen, the U.S. dollar__________in value, or__________, relative to the Japanese yen.

Explanation / Answer

The approximate U.S. dollar price of the book case would be 1180*0.8493 = $1002.174

If the nominal exchange rate for the U.S. dollar-Japanese yen falls from $0.009748 to $0.0082858 per Japanese yen, the U.S. dollar rises in value, or appreciate, relative to the Japanese yen.

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