econ

I asked this question couple days before.

Exporters suffer when their home currency depreciates and prosper when it appreciates. True or false? and why?

Can I explain it this way, it is false because, let say the exchange rate is 1 $/euro, and then dollars depreciated to 1.57 $/euro.

US is the home country.

A imported good from US (US exports)costs 1 euro in Europe, US exports will then get $1.
Then when it depreciated, the good costs 1 euro in Europe, now US exporters get $1.57.
(Can i assume the price stays constant at 1 euro?)

Does this make sense?

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  1. Although I was off base when I first answered your question, Economyst explained that false is the right answer. Your answer agrees with what he posted -- and it makes sense to me! :-)

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    Ms. Sue
  2. In fact the price in Euros would probably come down somewhat as long as the thing still looks cheaper than before in Euros and more would be sold. The exporter could raise his export price in dollars somewhat and still sell more and make more dollars both on the increased volume and the increased price in dollars but decreased price in Euros.

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