Suppose 1 U.S. dollar can be traded on the foreign exchange…
Suppose 1 U.S. dollar can be traded on the foreign exchange market for 1.5 Brazilian reals, 1.25 Swiss franc, or 0.75 British pound. a. How many dollars can 1 British pound purchase? (4 points) b. If the Brazilian real depreciates by 0.10 reals, how many dollars can 1 Brazilian real purchase? (4 points) c. Everything else held constant, if U.S. demand for Swiss chocolate increased what would we expect to happen to the Swiss franc in the long run? (2 points) Answer parts a, b, and c in the space provided. Show your work for parts a and b (i.e. 1 + 2 = 3; 2/4 = 0.5).
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