If export contracts are written in terms of foreign currency and import contracts are denominated in domestic currency a depreciation of the dollar during the currency contract period ?
Correct answer: D. All of the above
- A. should increase the dollar value of exports
- B. should not have any effect on the dollar value of U.S imports
- C. must increase the balance of trade
- D. All of the above
Explanation
With exports priced in foreign currency, dollar depreciation raises their dollar value, while imports contracted in dollars retain the same dollar value. Both effects improve the dollar balance of trade, so all three statements are correct.
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