Suppose that Great Britain is a major export market for your firm, a U.S.-based MNC. If the British pound depreciates against the U.S. dollar:(i) Your firm will be able to charge more in dollar terms while keeping pound prices stable.(ii) Your firm may be priced out of the U.K. market, to the extent that your dollar costs stay constant and your pound prices will rise.(iii) To protect U.K. market share, your firm may have to cut the dollar price of your goods to keep the pound price the same.

The demand and supply of pounds are D2 and S2. An increase in British demand for U.S. exports, ceteris paribus, couldGroup of answer choicesincrease the exchange rate ($/pound) to $2.50.decrease the exchange rate ($/pound) to $1.50.decrease the equilibrium quantity from 400 to 300 pounds.increase the demand for pounds from D2 to D1.

Why depreciation of the domestic currency could improve a firm's competitiveness against its foreign competitors?Group of answer choicesThe firm's brand becomes more attractive.All options are correct.Domestic labor becomes relatively cheaper.Foreign labour becomes relatively cheaper.

Suppose that you are a U.S. producer of a commodity good competing with foreign producers. Your inputs of production are priced in dollars and you sell your output in dollars. If the U.S. currency depreciates against the currencies of your trading partners,Group of answer choicesyour competitive position is likely worsened.your competitive position is likely improved.none of the optionsyour competitive position is unchanged.

Multiple Choice QuestionIf the same group of products costs 100,000 U.S. dollars and 50,000 British pounds, what would be the theoretical effect on the exchange rate between the two currencies?Multiple choice question.The difference in prices is not significant enough to have an impact on the exchange rate.The exchange rate should shift until it reaches the rate of two U.S. dollars equaling one British pound.The exchange rate should shift until it reaches the rate of one U.S. dollar equaling one British pound.The exchange rate should shift until it reaches the rate of one U.S. dollar equaling two British pounds.

Multiple Choice QuestionIf the domestic price level rises rapidly in the United States and remains constant in Great Britain, U.S. consumers will seek out low-priced British goods. What effect will this have?Multiple choice question.Create a net zero gain in demand for dollars.Increase the demand for pounds.Decrease the demand for pounds.Increase the demand for dollars.