International Economics Suppose you start the Totally Cool I

Suppose you start the Totally Cool International Shirt (TCIS) Company, a business that imports authentic college t-shirts from foreign universities and sells them on campuses in the United States. You need to translate the foreign prices of the shirts into dollars. Do this for the t-shirts from the following universities by filling in the table: Suppose that a month from now the exchange rates arc given below. State whether these new exchange rates represent an appreciation or a depreciation of each currency against the dollar. Also, without calculating the actual dollar prices of t-shirts, state whether the dollar price will fall or rise.

Solution

(a) Dollar Price

1. Sorbonne: 12 / 1 = $12

2. Delhi: 350 / 35 = $12

3. Seoul: 8,080 / 800 = $10.10

4. Hebrew: 24 / 3 = $8

5. Oxford: 8 / 0.7 = $1.14

(b)

1. Euro: Appreciation

Dollar price will increase.

2. Rupee: Appreciation

Dollar price will increase.

3. Won: Depreciation

Dollar price will fall.

4. Shekel: Appreciation

Dollar price will increase.

5. Pound: Appreciation

Dollar price will increase.