Question

1. Let's say that you are a United States company that purchases T-shirts from a company in Indonesia. The Indonesian company charges you 28,000 Indonesian Rupiahs for one T-shirt. The currency market is a freely fluctuating market. Let's say that last week one U.S. dollar exchanged for 14,000 Rupiahs. And let's say that this week one dollar exchanges for 15,000 Rupiahs. How much did you pay (in dollars) for one T-shirt last week, and how much did you pay this week?

last week: $1.00; this week: $1.13

last week: $2.00; this week: $1.87.

last week: $2.50; this week: $2.00

last week: $.50; this week: $.54

last week: $3.00; this week: $4.00

2. Let's say that you are a United States exporter that sells auto parts to a company in Brazil. You charge the Brazilian firm $10 for one particular auto part. Let's say that last week one dollar exchanged for 2 Brazilian real and let's say that this week one dollar exchanges for 3 Brazilian Real. How has the price changed for the Brazilian company? What has happened to the value of the dollar compared to the Brazilian Real and how will this most likely affect U.S. exports to Brazil?

It costs the Brazilian company 20 Reals per auto part last week and it costs the Brazilian company 16.67 Reals this week. The value of the dollar has decreased (depreciated). This will most likely increase U.S. exports to Brazil.

It costs the Brazilian company 10 Reals per auto part last week and it costs the Brazilian company 15 Reals this week. The value of the dollar has increased (appreciated). This will most likely reduce U.S. exports to Brazil.

It costs the Brazilian company 30 Reals per auto part last week and it costs the Brazilian company 20 Reals this week. The value of the dollar has decreased (depreciated). This will most likely reduce U.S. exports to Brazil.

It costs the Brazilian company 20 Reals per auto part last week and it costs the Brazilian company 30 Reals this week. The value of the dollar has increased (appreciated). This will most likely reduce U.S. exports to Brazil.

It costs the Brazilian company 5 Reals per auto part last week and it costs the Brazilian company 3.33 Reals this week. The value of the dollar has decreased (depreciated). This will most likely increase U.S. exports to Brazil.

Answer 1

Answer 1

Last week: $2.00; this week: $1.87

Reason: Last week, $1= 14000 Indonesian Rupiah

Thus, if the t-shirt's cost was 28000 rupiah, the cost in dollars would be $2.

Also, since the dollar has appreciated, it would cost even less for the US importers now to purchase the t-shirt.

Answer 2

It costs the Brazilian company 20 Reals per auto part last week and it costs the Brazilian company 30 Reals this week. The value of the dollar has increased (appreciated). This will most likely reduce U.S. exports to Brazil.

Reason: Since, last week, $1 = 2 Brazilian Real

And the cost of an auto part is $10

Thus, last week the Brazilian company paid = $2 * 10 = $20

Since, this week the dollar has appreciated, the brazilian company would have to pay higher.