When the Exchange Rate for the Euro Changes from $1

question 63

Multiple Choice

When the exchange rate for the euro changes from $1.00 to $1.20,then,holding everything else constant,the euro has

• A) appreciated and German cars sold in the United States become more expensive.
• B) appreciated and German cars sold in the United States become less expensive.
• C) depreciated and American wheat sold in Germany becomes more expensive.
• D) depreciated and American wheat sold in Germany becomes less expensive.

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Definitions:

Arm's Length Transaction

A transaction in which the parties involved act independently and have no relationship with each other, ensuring that the transaction is conducted on market terms.

Inactive Market

A market where there are few transactions, making it difficult to determine a fair price for financial assets due to lack of liquidity.

Price Quotations

Refers to the latest price at which an asset or service is traded between buyers and sellers or is offered to be bought or sold.

Observable Inputs

Inputs that are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use when pricing the asset or liability.