Answers for Tutorial Questions due Week 9

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Answers for Tutorial Questions due Week 9 11.2 If a dollar can buy 85 Japanese yen and a British pound costs \$2.50, how many yen would it take to buy one British pound? If a kg of copper costs 1 British pound in Britain, ¥160 in Tokyo, and \$2.00 in Australia, where is a pound of copper most expensive and where is it least expensive? a. 1AUD/Yen = 85 1£/AUD = 2.50 One pound would cost 85 x 2.5 = 212.5 yen. b. Using the dollar as the base currency, the copper costs \$2.50 in Britain, \$1.88 (160/85) in Japan and \$2 in Australia. Therefore, copper would be most expensive in Britain and least expensive in Japan. 11.6 If purchasing power parity applied to Big Macs, and a Big Mac costs \$3.50 in Australia while the British pound costs \$2.50 and €0.80 euros could be obtained for A\$1.00, how much would the Big Mac cost in Britain and Germany respectively? Why might it actually have a different price? Assuming purchasing power parity or that the cost of a Big Mac is the same in the local

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