Complete currency pass through arises when a 10 percent depreciation in the value of the dollar causes U.S?
Correct answer: B. import prices to rise by 10 percent
- A. import prices to fall by 10 percent
- B. import prices to rise by 10 percent
- C. export prices to rise by 10 percent
- D. export prices to fall by 10 percent
Explanation
Complete pass-through means the exchange-rate change is fully reflected in import prices measured in the domestic currency. Thus, a 10 percent dollar depreciation raises U.S. import prices by 10 percent.
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