The nominal exchange rate is the price of one currency in terms of another curre

Question

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 May 21, 2016, in terms of U.S. dollars per unit of foreign currency. Use the information in the table to answer the questions that follow. Suppose that on May 21, 2016, a marble statue handmade in Mexico is priced at 20,250 MXN. The approximate U.S. dollar price of the statue would be. If the nominal exchange rate for the U.S. dollar-Canadian dollar rises from $0,795 to $0.83475 per Canadian dollar, the U.S. dollar in value, or, relative to the Canadian dollar.

Explanation / Answer

1 MXN = $0.0920

So, 20,250 MXN = $0.0920×20,250 = $1863

Thus, US dollar price of statue = $1,863

If nominal exchange rate for US dollar – Canadian dollar rises from $0.795 to $0.83475 per Canadian dollar, the US dollar decreased in value, or depreciated relative to the Canadian dollar.

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