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What the spot exchange rate is

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Question 1: Assume that the price of a bushel of corn is EUR 3.50 in the Euro Zone and USD 4.00 in the U.S. market. Currently the USD/EUR spot exchange rate is: X0USD/EUR = 1.20. Using the corn prices as a price benchmark, according to ILOP, all else equal...which is correct?

  1. The US is likely to have a trade surplus with the Euro Zone
  2. Trade between the US and the Euro Zone should be balanced
  3. There is no relation between trade balances and the pricing of FX
  4. The US is likely to have a trade deficit with the Euro Zone

Reference no: EM132482897

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