1 a If the exchange rate changes from 170 per British pound

1.      a.       If the exchange rate changes from $1.70 per British pound (1) to $1.68

per 1, has the pound () appreciated or depreciated? Has the dollar appreciated or depreciated?

         b.      What happens to the -price that British residents pay for a $500 U.S.

export good due to the exchange rate change above?

         c.       What happens to the $-price that U.S. residents pay for a 1200 import

good from Britain?

         d.      How do these changes affect the economic welfare of U.S. exporters and

U.S. importers?

Solution

1.

a. dollar rate appreciated and pound rate depreciated

b. the britishers have to pay higher units of pounds in this case

c. the US people have to pay lesser units of dollars in this case

d. importers will be benefited with this case and exporters will be suffered. when the domestic currency is dominating then importers will be benefited.