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Homework2 - Spring 2009 ECON 203 Principles of...

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Spring 2009 Name: ___________________ ECON 203: Principles of Microeconomics TA: ______________________ Homework 2 (10 points) Due in discussion the week of February 16 th -20 th ; No late HWs will be accepted 1. Suppose the comparative-cost ratios of two products, roses and tulips, in Holland and England are: Holland: 1 rose = 6 tulips, and England: 2 roses = 4 tulips. In what product should each country specialize? Why? How may international trade allow each country to consume more than it is able to produce? (Hint: With trade, what would price ratio between the two goods become?) 2 points 2.The table below shows four different currencies and how much of each currency can be purchased with a U.S. dollar. Currency per U.S. $ Country Currency Year 1 Year 2 Britain pound 0.50 0.60 Mexico peso 6.00 6.50 Germany euro 1.20 1.00 Japan yen 110.00 125.00 a) Among which nations has the U.S. dollar appreciated or depreciated from year 1 to year 2? 1 point
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b) Ceteris paribus, based on the movements of exchange rates, goods from which country (or countries) would seem more or less attractive to the U.S. consumers? 1 point
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