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The Price of a Computer in the United States Is

question 91

Essay

The price of a computer in the United States is $1,000. The price of a car in Germany is 10,000 euros. The current exchange rate is 0.9 euros per dollar.
a) If a computer is exported from the United States to Germany with no barriers to trade, what will be the price of the computer in Germany?
b) If a car is imported to the United States from Germany with no barriers to trade, what will be the price of the car in the United States?
c) Suppose the dollar appreciates by 10 percent against the euro. How will the price of a computer exported from the United States change in Germany?
d) Suppose the dollar appreciates by 10 percent against the euro. How will the price of a car imported to the United States from Germany change in the United States?


Definitions:

Treasury Stock

Shares of a company's own stock that have been reacquired and held in the company's treasury for future use.

Stockholders' Equity

Represents the ownership interest of shareholders in a corporation, calculated as total assets minus total liabilities.

Par Common Stock

The stated face value of a share of common stock, which has no direct impact on its market value.

Total Effect

The overall impact or outcome that results from a particular action or set of circumstances, often used in the context of economic or policy analysis.

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