Results of exchange rate changes Early in September 1983, it took 255 Japanese y

Question

Results of exchange rate changes

Early in September 1983, it took 255 Japanese yen to equal $1. Nearly 28 years later, in August 2011, that exchange rate had fallen to 125 yen to $1. Assume that the price of a Japanese-manufactured automobile was $11,750 in September 1983 and that its price changes were in direct relation to exchange rates.

a. Has the price, in dollars, of the automobile increased or decreased during the 28-year period because of changes in the exchange rate? Select Increased or Decreased

b. What would the dollar price of the automobile be in August 2011, again assuming that the car's price changes only with exchange rates? Round your answer to the nearest cent.
$ _____

Explanation / Answer

a)Decrease ,since dollar is depreciating currency .

b) Dollar price after 28 year = 11,750*125 /255

                                         = $ 5,759.80

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