Western Illinois University



Dr. Westerhold Name: _______________________________________

Econ 170

HW#4: Trade Shares and Foreign Exchange due Wednesday, November 3rd. (Reminder, late assignments receive a 15% penalty per week day and an additional 15% penalty is levied for assignments not stapled)

Use the following table to answer questions 1-8

|Country of Origin |Dollar Value (in millions)|Exported To |

|Brazil |$100 |Argentina |

|Brazil |$75 |Paraguay |

|Brazil |$50 |Uruguay |

|Argentina |$80 |Brazil |

|Argentina |$50 |Paraguay |

|Argentina |$10 |Uruguay |

|Paraguay |$25 |Brazil |

|Paraguay |$15 |Argentina |

|Paraguay |$5 |Uruguay |

|Uruguay |$4 |Brazil |

|Uruguay |$2 |Argentina |

|Uruguay |$1 |Paraguay |

1. Determine the trade balance for each of the 4 MERCOSUR countries: Brazil, Argentina, Paraguay, and Uruguay

2. Determine each country’s share of trade within Mercosur. Show your work.

Brazil:

Argentina:

Paraguay:

Uruguay:

3. What is the trade concentration ratio for the two smallest countries, Paraguay and Uruguay? Show your work.

4. Suppose the rest of the world (ROW) has total exports of $50000million (and therefore, total imports of $50000 million). If MERCOSUR exports a total of $800million of goods to the rest of the world (ROW) and imports $950 million of goods from the rest of the world (ROW) then determine MERCOSUR’s trade share of the world economy.

Use the following to answer questions #5=#10: Assume the exchange rate between the US dollar (USD) and Japanese Yen (JPY) is 57.25.

5. If the US imports 250,000YEN worth of product from Japan, how many USD will be needed to pay the import bill? Show your work.

6. If the US exports $350,000 of product to Japan, how many JPY will be received by US firms for payment? Show your work.

7. Assume the exchange rate is now 1 USD=80JPY. What will US imports cost now? (compare to #5). Show your work. Are imports more or less expensive now for US consumers?

8. Assume the exchange rate is now 1USD=80JPY. What will US exports be worth now? (compared to #6). Show your work. Are US exports more or less expensive for Japanese consumers now?

9. Which currency appreciated? Depreciated? Briefly explain your answer.

10. With this exchange rate change, do you expect the US trade balance (exports-imports) to increase (more positive) or decrease (more negative)? (Think about if US consumers will buy more or less imports and if the US will sell more or less exports). Briefly explain your answer.

Use the following table to answer questions 11-14

|Currency | 1 USD  |

|  Australian Dollar   | 1.49365  |

|  Brazilian Real   | 2.131  |

|  British Pound   | 0.614628  |

11. If you were traveling to Australia and converted $1500USD into Australian dollars how many AUD would you have? Show your work.

12. What is 1 Brazilian Real worth in US dollars? Show your work.

13. Is the British Pound (GBP) stronger or weaker than the US dollar (USD)? Explain.

14. Determine what 1 British pound (GBP) is worth in terms of Brazilian Real. Show your work.

End of Assignment.

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