Answer to Question #96515 in Macroeconomics for Biso

Question

The exchange rate between the Banana Republic dollar (B$) and the US dollar (US$) was B$14.50 to US$1 in 2017,and the exchange rate between two currencies is B$1 to US$0.08 in 2018. A trader, Tom, bought second hand smartphones cost $100 in both the year 2017 and 2018.
A)what is the exchange rate between B$ and US$ in 2018 if we use direct quoting method?
B) what happens to the B$ VS US$ exchange rate from 2017 to 2018?
C) if Tom sells the phones for B$2000 locally online, in which year would Tom make a higher profit? Show your calculation to substantiate your answer.

Answer 1

A) The exchange rate between B$ and US$ in 2018 if we use direct quoting method is:

1/0.08 = B$12.5 to US$1.

B) The B$ VS US$ exchange rate decreased from 2017 to 2018.

C) if Tom sells the phones for B$2000 locally online, then Tom would make a higher profit in 2018.