Effects of Currency Appreciation and Depreciation
a) Given illustrative data for a company selling its output in a foreign country, calculate effects of an appreciation and a depreciation in the exchange rate on the price of its output in that country and the likely effects on the demand for its output.
b) For a company sourcing key inputs in a foreign country, calculate effects of an appreciation and depreciation in the exchange rate on its input prices and the likely effects on the company's cost of production.
c) can a devaluation of the dollar, improve US GDP and provide economic growth? Based on your observation, is that statement true and why? Explain and justify your claims
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a) Given illustrative data (provided by the instructor) for a company selling its output in a foreign country, calculate effects of an appreciation and a depreciation in the exchange rate on the price of its output in that country and the likely effects on the demand for its output.
Table 15.2: Effect of Dollar Appreciation and Depreciation on U.S. Exports and Imports
R = Euro/$ Domestic Price Jan 05: R = 0.76 Jan 06: R = 0.82 Effect on Exports (X) and Imports (M)
U.S. Exports: Televisions $1,000 Euro 760 Euro ...
Solution Summary
How a change in the $US/Euro exchange rate affects prices, trade and GDP.