Tuesday

March 31, 2015

March 31, 2015

Posted by **econ** on Wednesday, May 28, 2008 at 7:49pm.

E=exchange rate

Suppose E $/euros = 3/2 and E $/pounds = 2, and there is no trade friction, the no arbitrage condition implies

that E pounds/euros = 2

- econ -
**economyst**, Thursday, May 29, 2008 at 9:29amFalse. Think it through.

You have $/euros = 3/2 which means $3 = 2E. Also, you have 2E=1L. Ergo, $3=1L.

- econ -
**econ**, Thursday, May 29, 2008 at 10:17amso the arbitrage condition should be E pounds/euros=3/4. ( i got this by multiplying 1/2 and 3/2 )

Is this correct?

**Answer this Question**

**Related Questions**

econ - True or False? E=exchange rate Suppose E$/euro = 3/2 and E$/pound = 2 and...

math - Suppose you are exchanging currency in the London airport. The currency...

Math - Many nations compare the value of their currency to the US dollar. On a ...

Math - Many nations compare the value of their currency to the US dollar. On a ...

Math - Many nations compare the value of their currency to the US dollar. On a ...

algebra - euros are currency used in several european countries. on one day in ...

math - Minni travels to Italy. She changes 550 GBP to euros at an exchange rate ...

economics - The following are hypothetical exchange rates: 2 euros = 1 pound; $...

Econ T/F - Pound's purchasing power is greater than Dollar's if Exchange rate $/...

Economcis - I need some help on the following question, thanks. e = euros ...