Suppose the exchange rate was $1 = 120 yen in 2007 and $1 = 100 yen in 2008.

Suppose the exchange rate was $1 = 120 yen in 2007 and $1 = 100 yen in 2008. If an electronic component made in Japan cost 12,000 yen in 2007, its dollar price is ______________ in 2007. Its dollar price will be _______ in 2008. This is called a/an ____________ of the dollar.

Select one:

a. $100 in 2007; $125 in 2008; depreciation

b. $100 in 2007; $125 in 2008; appreciation

c. $100 in 2007; $120 in 2008; depreciation

d. $50 in 2007; $25 in 2008; appreciation

Solutions

Expert Solution

In 2007, the component cost was 12000 yen or 12000/120 = $100 in US dollars

In 2008, it has a cost of 12000/100 = $120 in US dollars

This implies that from 2007 to 2008, Americans find it expensive to buy the component which makes dollar weak and Yen strong

Hence this is dollar depreciation and yen appreciation

Select option C

Rahul Sunny answered 1 year ago

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