22 suppose that a generic hotel room costs 80 per

22. Suppose that a generic hotel room costs $80 per night in the United States and 80 euros per night in
France. Suppose that the exchange rate is 0.80 euros per U.S. dollar. What is the price of the U.S. hotel
room in terms of euros?
a. 100 euros
b.
10 euros
c. 64 euros
d. 640 euros
23. Assume that the only cost difference between a vacation in France and a vacation in the United States is
due to the difference in the price of a hotel room. Based on this assumption, which vacation would be less
expensive to residents of either country?
24. The following question focuses on the exchange rate for U.S. dollars and Japanese yen, which is assumed
to float. The exchange rate is defined as the number of U.S. dollars one must pay for one yen. Suppose
that a trade agreement between Japan and the United States makes it less expensive for U.S. residents to
purchase Japanese goods. How does this affect the dollar-yen exchange rate?
25. Assume the Fed wants to raise net exports. Then the Fed should:

26. Suppose that the exchange rate between the U.S. dollar and the Japanese yen floats. Initially, American
purchases of Japanese assets are equal to Japanese purchases of American assets, so neither country has a
net financial inflow, and neither country has a trade deficit with the other.
Then, suppose Japan decides to increase its purchases of U.S. financial assets by 0.3 trillion yen.
After the Japanese increase their purchases of U.S. assets, the U.S. dollar will ________ against the yen,
and the yen will __________ against the U.S. dollar.
As a result of the increase in Japanese purchases of U.S. assets, the United States will
_________________.
A. Still have no trade deficit with Japan
B. Have a trade deficit with Japan equal to the newly created U.S. net financial inflow
C. Have a trade deficit with Japan equal to the increase in the quantity of yen exchanged
D. Have a trade deficit with Japan equal to the change in U.S. exports to Japan
E. Have a trade deficit with Japan equal to the change in U.S. imports from Japan