Early in September 1983, it took 245 Japanese yen to equal $1. More than 20 year

Question

Early in September 1983, it took 245 Japanese yen to equal $1. More than 20 years later that exchange rate had fallen to 108 yen to $1. Assume the price of a Japanese-manufactured automobile was $8,000 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 20-year period because of changes in the exchange rate?
b. What would the dollar price of the car be, assuming the car’s price changes only with exchange rates?

Explanation / Answer

Look at the trend. From 1983 to 2003 the yen appreciated with respect to the dollar or the dollar bought less yen. A. If the same dollars buys less yen than the price in dollars of the automobile has increased because of 20 year change in exchange rate. B. Price of car? $8,000 or 8000(245) = 1,960,000 yen Assuming the price only changes with the exchange rate you use the same calculation with the new exchange rate working backwards. 1,960,000/108 = $18,148.15

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.