Problem

The appreciation in the dollar's exchange value from 1980 to 1985 made U.S. products (less/more) expensive and foreign products (less/more) expensive, (decreased, increased) U.S. imports, and (decreased, increased) U.S.

exports.

Suppose the dollar/franc exchange rate equals $0.50 per franc. According to the purchasing-power-parity theory, what will happen to the dollar's exchange value under each of the following circumstances?

a. The U.S. price level increases by 10 percent and the price level in Switzerland stays constant.

b. The u.s. price level increases by 10 percent and the price level in Switzerland increases by 20 percent. c. The U.S. price level decreases by 10 percent and the price level in Switzerland increases by 5 percent. d. The U.S. price level decreases by 10 percent and the price level in Switzerland decreases by 15 percent.