Question

The exchange rate between the US and Country B is $0.8653 / CRB. The US exports $157.0 billion of goods and services to Country B and Country B exports CRB 5,857.0 billion of goods and services to the US.

a.)Calculate the indirect (USD/CRB) exchange rate to 4 decimal places (for example, X.xxxx).

b.)Calculate the amount of the US trade surplus or (deficit) with Country B in US Dollars.

Answer 1

When the exchange rate is represented as the quantity of foreign currency required to buy 1 units of the domestic currency, it is Indirect exchange rate

Here,

1 CRB = 0.8653 $

This is direct exchange rate.

a) Indirect exchange rate between $ and CRB = 1/0.8653

= 1.1557 (approx)

It means for buying 1 $, 1.1557 CRB is needed.

b) Total US export = $157.0 billion

Total US import = CRB 5,857.0 billion

converting the value in US $.

1 CRB = 0.8653 $

hence, 5,857.0 billion CRB = 5857 * 0.8653 = 5068.0621 billion

Trade surplus/deficit = Exports - Imports

= 157 billion - 5068.0621 billion

= 4911.0621 billion (deificit)