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Assume that the exchange rate between the dollar and the Yen is ¥100 = $1. Suppose the exchange rate changes to ¥150 = $1. What is the price in Yes of a $200 iPod before and after the exchange rate change? a. ¥20 000 before; ¥15 000 after. b. ¥20 000 before; ¥30 000 after. c. ¥300 before; ¥150 after. d. ¥300 before; ¥200 after.

Question

Assume that the exchange rate between the dollar and the Yen is ¥100 = 1.Supposetheexchangeratechangesto¥150=1. Suppose the exchange rate changes to ¥150 = 1. What is the price in Yes of a $200 iPod before and after the exchange rate change?

a. ¥20 000 before; ¥15 000 after.

b. ¥20 000 before; ¥30 000 after.

c. ¥300 before; ¥150 after.

d. ¥300 before; ¥200 after.

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Solution

The price of a 200iPodbeforetheexchangeratechangewouldbecalculatedbymultiplyingthepriceindollarsbytheexchangerate.So,200 iPod before the exchange rate change would be calculated by multiplying the price in dollars by the exchange rate. So, 200 * ¥100/$1 = ¥20,000. This is the price before the exchange rate change.

After the exchange rate change, the price would be calculated in the same way, but using the new exchange rate. So, 200¥150/200 * ¥150/1 = ¥30,000. This is the price after the exchange rate change.

So, the correct answer is:

b. ¥20,000 before; ¥30,000 after.

This problem has been solved

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