Assignment:
Answer questions 1→3 using the U.S. Dollar exchange rate information from November 1, 2016 and November 1, 2018 that we used in class (note: the exchange rate handouts can also be found in the Lecture Talking Points folder under the Course Content tab). Be sure to use the correct table for each year. In terms of rounding, use four (4) decimal places for the exchange rates, and use zero (0) decimal places for answers measured in U.S. Dollars or any foreign currency.
EUR
NOV 1, 2016 = Euro
Units Per USD = 0.9056166837
USD per Unit = 1.1042199398
Nov 1, 2018 = EUR
Euro
Units Per USD = 0.8774581908
USD per Unit = 1.1396554394
1. Did the Euro appreciate or depreciate against the U.S. Dollar from November 1, 2016 to November 1, 2018? How do you know?
2. (parts A and B)
2A. Assume a citizen from Argentina enrolled at UIC in Fall, 2018 and paid for tuition in full on November 1, 2018. The undergraduate tuition schedule for Fall 2018 shows the 4-year guaranteed out-of-state tuition per semester for 12 or more credit hours is $11,900. How much would the 4-year (i.e. 8 semesters) tuition be in terms of the Argentine Peso based on the November 1, 2018 exchange rate between the Argentine Peso and the U.S. Dollar? Show your work.
2B. The undergraduate tuition schedule for Fall 2016 shows the 4-year guaranteed out-of-state tuition per semester for 12 or more credit hours was $11,720. Do you think that the change in the U.S. Dollar/Argentine Peso exchange rate since November 1, 2016 would have encouraged or discouraged citizens from Argentina from attending college in the U.S. in Fall 2018? Why? Provide support for your answer by calculating the 4-year (i.e. 8 semesters) tuition in Argentine Pesos for Fall 2016 at UIC (assume tuition was paid in full on November 1, 2016).
3. Assume you plan to travel to the Southern Hemisphere after final exams. You've narrowed your choices down to two that you like equally: Colombia or Australia. The total cost of your trip to Australia will be 5,000 Australian Dollars. The total cost of your trip to Colombia will be 5,000,000 Colombian Pesos. Based on the November 1, 2018 exchange rates, which trip is priced less in terms of U.S. Dollars? Show your work.
4. In terms of the Balance of Payments Account, services imported into the U.S. from other countries, and services exported from the U.S. to other countries are reported in the current account; while goods imported into the U.S. from other countries, and goods exported from the U.S. to other countries are reported in the capital or financial account. Indicate whether you believe the statement is TRUE or FALSE, and then defend your answer.
5. Based on the information below and using the two good-two country model, which country has a comparative advantage in the production of wheat? Support your answer by calculating the opportunity cost to produce one (1) ton of wheat in each country.
With full employment of resources, the U.S. can produce 24 million tons of wheat OR 12 million tons of corn.
With full employment of resources, Canada can produce 16 million tons of wheat OR 4 million tons of corn.
6. If the U.S. imposed a tariff on the importation of high-definition televisions, what do you think will happen to the price of imported high-definition televisions in the U.S.? Why?
7. The U.S. has recently imposed trade restrictions on Russia; prohibiting the import of many Russian goods. If this is the only factor affecting the U.S. Dollar/Russian Ruble exchange rate, we should expect the Russian Ruble to depreciate relative to the U.S. Dollar. Indicate whether you believe the last statement is TRUE or FALSE, and then defend your answer.
8. In 2002, President Bush applied a 30% tariff on imported steel. Those that benefitted from this tariff was/were:
A. Foreign steel companies and their employees
B. U.S. automobile companies and their employees
C. U.S. steel companies and their employees
D. Both answer choices B and C are correct.
E. None of the answer choice A→D are correct.
9. Consider statements I and II below when answering this question:
I. If the United States imposes a trade restriction on Japan (i.e. a tariff or a quota), this could lead to a reduction in United States exports to Japan because fewer imports from Japan would result in U.S. Dollar appreciation relative to the Japanese Yen.
II. If the United States imposes a trade restriction on Japan (i.e. a tariff or a quota), this could lead to a reduction in United States exports to Japan because fewer imports from Japan would reduce income in Japan, reducing demand for goods and services produced in the United States by Japanese households and businesses.
A. Statement I is true, but statement II is false
B. Statement I is false, but statement II is true
C. Both statements I and II are true
D. Both statements I and II are false
10. Consider statements I and II below when answering this question:
I. Assume that the interest rate on a two year bond is the same in the U.S. and Great Britain. Also assume that a change in the interest rate on a two year bond is the only factor affecting the exchange rate. If the United States increases interest rates in December (as recently suggested by the Wall Street Journal), while Great Britain keeps their interest rate unchanged, we should expect the U.S. Dollar to depreciate relative to the British pound.
II. Assume the inflation rate in the United States and Canada are identical. Also assume a change in inflation is the only factor affecting the exchange rate. If inflation begins to decrease in the U.S., but remains unchanged in Canada, we should expect the U.S. Dollar to appreciate relative to the Canadian Dollar.
A. Statement I is true, but statement II is false
B. Statement I is false, but statement II is true
C. Both statements I and II are true
D. Both statements I and II are false
11. Visit the Foreign Trade - By Country web site in Blackboard (in the Lecture Talking Points folder under the Course Content tab). Choose any country except Costa Rica and examine its trade patterns in goods with the U.S. - both imports and exports (found under the end-use menu selection). Identify one product for which you think the U.S. has a comparative advantage as compared to the country you selected, and identify one product from the country you selected for which you think that country has a comparative advantage as compared to the U.S. Provide support for your answer (i.e. in supporting your answer, be sure to compare the U.S. Dollar amounts of both imports and exports of the products you choose). Next, explain what would give the U.S. and the country you selected a comparative advantage in the production of the goods you identified (i.e. for each country, the U.S. and your country of choice, what is ONE possible source of the comparative advantage). A sample answer can be found on page 6 - DO NOT submit the sample answer with your completed assignment.
Begin your answer to this question by writing down the following information before answering the question:
The name of the country you have chosen
The U.S. good with a comparative advantage
The chosen country good with a comparative advantage