Donald of America (US) orders a PNG bilum from Highlands Tours. The bilum cost K400. The exchange rate is K1.00 = US$0.30. How much US dollar is needed to buy this bilum?

Answer 1

To determine how much US dollars are needed to buy a bilum that costs K400, we can use the exchange rate provided:

1. The exchange rate is K1.00 = US$0.30.
2. To find the cost in US dollars, we can multiply the cost in PNG Kina by the exchange rate.

First, we can calculate the amount in US dollars:

\[ \text{Cost in US dollars} = \text{Cost in Kina} \times \text{Exchange rate} \] \[ \text{Cost in US dollars} = 400 , \text{Kina} \times 0.30 , \text{US dollars/Kina} \] \[ \text{Cost in US dollars} = 400 \times 0.30 = 120 , \text{US dollars} \]

So, Donald would need $120 US dollars to purchase the bilum.

Answer 2

Explain how the buying of bilum by Donald would affect PNG's foreign exchange reserves assuming nothing else changes. Explain in one short sentence.

Answer 3

The purchase of the bilum by Donald would result in a decrease in PNG's foreign exchange reserves, as K400 would be exchanged for US dollars, reducing the local currency reserves.

Answer 4

Briefly explain the effect of the Asian Pacific Economic Cooperation (APEC) meeting in PNG on the PNG's balance of payment position. Explain in one short sentence.

Answer 5

The APEC meeting in PNG is likely to improve the country's balance of payments position by increasing foreign investments and tourism spending, which would lead to greater foreign exchange inflows.

Answer 6

How can the exchange rate be used by the government as a policy measure to correct a balance of payments deficit situation?
Answer in one short sentence.

Answer 7

The government can use the exchange rate as a policy measure by devaluing its currency to make exports cheaper and imports more expensive, thereby encouraging exports and reducing the volume of imports to help correct the balance of payments deficit.