For a domestic exporter with all costs and output prices denoted in the domestic currency, a depreciation of the domestic currency will:

Question

BlackTom AI · Accepted Answer

When both costs and output prices are quoted in domestic currency, an exchange rate move does not change their domestic-currency amounts.

1) Relevant knowledge points and concepts
- Exchange-rate depreciation (domestic currency weakening) changes the value of the domestic price when expressed in foreign currency, but it does not change the nominal amount measured in the domestic currency itself.
- If all costs and output prices are denominated in domestic currency (no foreign-currency-priced inputs or contracts), nominal domestic-currency costs and revenues remain fixed at their contractual/posted values.
- Imports or foreign-currency obligations would be affected, but the question excludes these by stating “all costs ... denoted in the domestic currency.”

2) Step-by-step reasoning
- Let domestic price of output = 100 D (domestic currency units). Domestic cost = 70 D.
- Suppose initial exchange rate: 1 D = $1 (foreign). Foreign-currency price = $100; foreign-currency cost = $70.
- Domestic currency depreciates so 1 D = $0.50. Domestic price still 100 D; domestic cost still 70 D.
- Now foreign-currency price = 100 × $0.50 = $50; foreign-currency cost = 70 × $0.50 = $35.

3) Intermediate calculation steps shown above:
- Domestic price unchanged: 100 D → 100 D.
- Foreign value before: 100×1 = $100; after: 100×0.5 = $50.
- Costs similarly unchanged in D, but their foreign-currency equivalents fall.

4) Why the correct answer is correct
- The depreciation alters only the conversion into foreign currency; it does not alter the domestic-currency numerical amounts that the firm pays or charges when those amounts are fixed in domestic currency. Therefore nominal domestic costs do not change.

5) Why other options are incorrect (briefly)
- “Increase costs” is incorrect because domestic-currency costs are unchanged if they are contracted/denominated in domestic currency. “Lower costs” is incorrect for the same reason. Claims about profit changes depend on foreign-currency effects or imported inputs, which the question excludes.

6) Conclusion
- Hence a depreciation of the domestic currency will not change costs (in domestic-currency terms). This confirms the provided answer: not change costs.

For a domestic exporter with all costs and output prices denoted in the domestic currency, a depreciation of the domestic currency will:单项选择题

类似问题

An increase in real interest rates generally leads to:

Which helps explain why exchange-rate pass-through has declined since the 1990s?

What explains why exchange rate changes in the short run are larger than in the long run?

The country’s relative price level is rising. This would cause its currency to:

Which of these help explain why the demand curve for currency is downward-sloping? An appreciated currency causes:

Which of these would impact short run exchange rates more than long run? Check all correct answers Each choice is worth 1 point, which you will receive if you correctly either check or do not check the choice

A domestic firm can minimize the negative effects of an appreciation of the domestic currency by: Check all correct answers Each choice is worth 1 point, which you will receive if you correctly either check or do not check the choice

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单