What about a dollar depreciation

Reference no: EM132172641

Question: 1. Suppose ABC Inc., a U.S. auto manufacturer, obtains all of its auto components in the United States and that its costs are denominated in dollars. Assume the dollar's exchange value appreciates by 50 percent against the Mexican peso. What impact does the dollar appreciation have on the firm's international competitiveness? What about a dollar depreciation?

2. Suppose ABC Inc., a U.S. auto manufacturer, obtains some of its auto components in Mexico and that the costs of these components are denominated in pesos; the costs of the remaining components are denominated in dollars. Assume the dollar's exchange value appreciates by 50 percent against the peso. Compared to your answer in study question 8, what impact will the dollar appreciation have on the firm's international competitiveness? What about a dollar depreciation?

Reference no: EM132172641

Questions Cloud

What factors influence the rate of growth of world trade : What factors explain why the world's trading nations have become increasing inter dependent, from an economic and political viewpoint.

How did the eurocurrency market develop : What caused the international debt problem of the developing nations in the 1980s? Why did this debt problem threaten the stability of the international banking

What are special drawing rights : What is meant by a reserve currency? Historically, which currencies have assumed this role? What is the current role of gold in the international monetary.

Determine a nation demand for international reserves : What are the major factors that determine a nation's demand for international reserves? The total supply of international reserves consists of two categories.

What about a dollar depreciation : Suppose ABC Inc., a U.S. auto manufacturer, obtains all of its auto components in the United States and that its costs are denominated in dollars.

How does the j-curve effect relate to the time path : How does the J-curve effect relate to the time path of currency depreciation? What implications does currency passthrough have for a nation whose currency.

What is meant by the marshall-lerner condition : What is meant by the Marshall-Lerner condition? Do recent empirical studies suggest that world elasticity conditions are sufficiently high to permit successful.

What effects does labor migration have : Is the theory of multinational enterprise essentially consistent or inconsistent with the traditional model of comparative advantage?

What is meant by the term multinational enterprise : What are the most important motives behind an enterprise's decision to undertake foreign direct investment? What is meant by the term multinational.

User Account

All Pages