Complete Currency Pass-Through Arises When a 10 Percent Depreciation in the Value

question 113

Multiple Choice

Complete currency pass-through arises when a 10 percent depreciation in the value of the dollar causes U.S.________prices to __________.

• A) import, fall by 10 percent
• B) import, rise by 10 percent
• C) export, rise by 10 percent
• D) export, rise by 20 percent

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Definitions:

Futures Price

The predetermined price agreed upon in a futures contract for the delivery of an asset at a future date.

Loss

A reduction in money or asset value, often the difference between purchase price and selling price if the latter is lower.

Normal Backwardation

A market condition in which the futures price is below the expected spot price, often occurring in markets expecting the price of the underlying asset to rise.

Risk Premiums

The extra return expected by investors for taking on additional risk compared to a risk-free asset.