Consider a U

question 41

Multiple Choice

Consider a U.S.-based MNC with a wholly-owned European subsidiary selling a product sourced in euro and priced in euro with inelastic demand. Following a depreciation of the dollar against the euro, which of the following is the most true?

• A)Since they have inelastic demand, the U.S. firm can just pass through the impact of the exchange rate change.
• B)Since they have elastic demand, the U.S. firm cannot just pass through the impact of the exchange rate change.
• C)Since the exchange rate movement was favorable to the U.S. firm, there is no impact on the firm's position.
• D)None of the above.