Answer-first summary for fast verification
Answer: American goods are cheaper to European buyers (benefiting US exporters)
If EUR/USD rises from **1.30 to 1.43**, the **euro strengthens** and the **U.S. dollar weakens**. As a result, U.S.-priced goods become **cheaper in euro terms** for European buyers, which benefits U.S. exporters. Therefore, **A is true**. - **B** is false because weaker dollars generally make U.S. goods cheaper, not more expensive, for Europeans. - **C** is false because a stronger euro makes European goods more expensive for Americans. - **D** is false because exchange rate changes can still materially affect unhedged importers and exporters.
Author: Manit Arora
Ultimate access to all questions.
Question-191.2. Since the start of 2011, the spot foreign currency exchange rate between the U.S. dollar and Euro has moved from about EUR/USD $1.30 to about EUR/USD $1.43 (EUR/USD = base/quoted currencies). Which of the following is TRUE?
A
American goods are cheaper to European buyers (benefiting US exporters)
B
American goods are more expensive to European buyers (hurting US exporters)
C
European manufacturers benefit in American markets as their goods become cheaper to American buyers
D
Interest rate parity and arbitrage tend to approximately nullify the impact of the currency exchange rates on even un-hedged importers and exporters
No comments yet.