Assume That the Exchange Rate Between the Dollar and the Euro

question 11

Multiple Choice

Assume that the exchange rate between the dollar and the euro is €1 = $1. Suppose the exchange rate changes to €1.25 = $1. What is the price in dollars of a €200 pair of Italian shoes before and after the exchange rate change?

• A)$200 before; $160 after
• B)$200 before; $250 after
• C)$160 before; $125 after
• D)$125 before; $160 after

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Definitions:

Dual Sourcing

A source strategy in which firms produce products in-house to ensure quality and availability while also purchasing the same products from suppliers in order to force competition and push innovation within the in-house unit.

Reshoring

The process of bringing manufacturing and production back to a company's original country from overseas to benefit from lower costs, better quality control, or tighter supply chain management.

Firm's Product

The goods or services produced and offered by a business to its customers.

Economic Climate

The overall state and conditions of an economy, affecting business confidence, consumer spending, and financial markets.