Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency. To Explain: The impact of strengthening of local currency on exporters.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

If the United States imports more goods from abroad than it exports, thenforeigners will tend to have a surplus of U.S. dollars. What will this do tothe value of the dollar with respect to foreign currencies? What is the corresponding effect on foreign investments in the United States?

Explain how exchange rate fluctuations affect the return from a foreign market measured in dollar terms. Discuss the empirical evidence on the effect of exchange rate uncertainty on the risk of foreign investment.

If US dollars gets lower interest rates in the United States. How would this affect a fundamental forecast of foreign currencies? How would this affect the forward rate forecast of foreign currencies?

Answer 2

Question

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Answer 6

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Answer 7

Chapter 10, Problem 1UTI

To determine

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Answer 8

Expert Solution & Answer

Answer to Problem 1UTI

When US Dollar is expected to strengthen in comparison to foreign currencies, the exporters will have a disadvantage because the demand of their products in the foreign market will decline asimporters of these productswill need to shell out more of their local currency for purchase of same $ value of product.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The above statement can be explained with the help of following example. Say, a product cost is USD 10,000. The current exchange rate for Foreign Currency (FC) is 1 USD=4 FC. So, the cost to the importer would be 10,000×4= 40,000 FC . Now, when the dollar value strengthens, the importer’s home currency will weaken which would imply more outflow of their currency in exchange of dollars. As exports are generally done in the currency of the exporters, so the importers of the product would need to pay to US exporters in $. Assuming, now they need to pay 5 FC for 1 dollar. Hence, now the importer will pay 10,000×5=50,000 FC for same product. Since, the import becomes costlier, the demand for the product in the foreign country decreases and hence the exports decline putting the exporters at a disadvantage.

Thus, the impact currencies have been computed.

Answer 12

Ch. 10 - Prob. 1UTI Ch. 10 - A U.S. company purchases inventory from a foreign...Ch. 10 - Prob. 4UTI Ch. 10 - Prob. 1E Ch. 10 - Prob. 2.1E Ch. 10 - Prob. 2.2E Ch. 10 - Prob. 2.3E Ch. 10 - Prob. 2.4E Ch. 10 - Prob. 2.5E Ch. 10 - Prob. 4.1E

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency. To Explain: The impact of strengthening of local currency on exporters.

Videos

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.

Answer to Problem 1UTI

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency. To Explain: The impact of strengthening of local currency on exporters.

Videos

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency. To Explain:The impact of strengthening of local currency on exporters.

Answer to Problem 1UTI

Explanation of Solution

Want to see more full solutions like this?

Chapter 10 Solutions

Exchange rate- Exchange rate means the rate at which one currency can be exchanged with another currency.

To Explain:The impact of strengthening of local currency on exporters.