Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / A pair of hiking boots costs $120 in the U

A pair of hiking boots costs $120 in the U

Economics

A pair of hiking boots costs $120 in the U.S., if the real exchange rate is 6/5 and the nominal exchange rate is 2 Brazilian reais per dollar, what is the price of the same hiking boots in Brazil?

 

If a country's exports were 500 billion pesos and its imports were 300 billion pesos, what would its trade balance be?

 

 A U.S. grocery store chain bought $800,000 worth of Kenyan currency from a bank in Kenya. It then used these funds to buy $800,000 worth of coffee from Kenyan coffee growers.

 

As a result of this exchange, by how much and in which direction did:

A. U.S. net exports change?

B. U.S. net capital outflow change?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

1) Computation of Price of the same hiking boots in Brazil:

Real Exchange Rate = Nominal Exchange Rate * (Price in Foriegn Country) / (Price in Domestic Country)

6/5 = 2 * 120/Price in Brazil

Price in Brazil = 120 * 2 * 5/6 = 200 brazilian reais

 

 

2) Computation of Trade Balance:

Trade Balance = Imports - Exports 

= 300 billion pesos - 500 billion pesos

Trade Balance = -200 billion pesos

So, there is trade deficit of 200 billion pesos.

 

3)

A) As the funds are used to import $800000 worth of coffee thus net exports (i.e. exports-imports) have reduced. So, U.S. net exports decreased by $800,000. 

B) Net capital outflows increased because of the imports worth $800,000. So, U.S. net capital outflows increased by $800,000.