Question Details

An appreciation of the U.S. dollar has what impact on Harley-Davidson 



1.US and Canada can both grow wheat and can do mining.  Use the following table to look for which country has a comparative advantage in mining.  (HINT: Find the cost of mining in terms of wheat in each country.)

	Absolute Cost in US	Absolute Cost in Canada
Wheat			$5			C$8
Mining			$10			C$12

a.	Canada has a comparative advantage in mining.
b.	The US has a comparative advantage in mining.
c.	No comparative advantage in mining exists for either nation.
d.	We must first know the exchange rate to be able to answer this question.
e.	Both a and b.

	

2.	The optimal currency area involves a trade-off of reducing transaction costs but the inability to use changes in exchange rates to help ailing regions. If the US, Canada, and Mexico had one single currency (the Peso-Dollar) we would tend to see all of the following EXCEPT:
a.	Even more intraregional trade of goods across the three countries. 
b.	Lower transaction costs of trading within North America.
c.	A greater difficulty in helping Mexico as you can no longer deflate the Mexican peso.
d.	Less migration of workers across the three countries.
e.	An elimination of correlated macroeconomic shocks across the countries.

	

	3.	If the value of the U.S. dollar rises from  1.0 per dollar to  1.3 per dollar,
a.	imports of automobiles from Germany will decline
b.	American inflation will increase
c.	German exports of all traded goods will decline
d.	American exports to Germany will decrease
e.	sales by American manufacturers for the export markets will increase.


	


	4.	An appreciation of the U.S. dollar has what impact on Harley-Davidson (HD), a U.S. manufacturer of motorcycles?
a.	domestic sales of HD motorcycles increase and foreign sales of HD motorcycles increase
b.	domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles increase
c.	domestic sales of HD motorcycles increase and foreign sales of HD motorcycles decrease
d.	domestic sales of HD motorcycles decrease and foreign sales of HD motorcycles decrease
e.	only manufacturers who produce traded goods are affected




	
	5.	In the last twenty-five years, the Yen and German mark and now the Euro have
a.	fluctuated widely against the dollar
b.	appreciated against the dollar and then depreciated against the dollar
c.	exchanged without restrictions
d.	all of the above
e.	none of the above




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