In general, a appreciation of the Australian dollar against the Japanese yen will benefit: Question 2 Answer a. a firm that sells in Australia but produces in Japan. b. a firm that sells in Japan and produces in Japan. c. a firm that sells in Japan but produces in Australia. d. no Australian producers.
Question
In general, a appreciation of the Australian dollar against the Japanese yen will benefit: Question 2 Answer
a. a firm that sells in Australia but produces in Japan.
b. a firm that sells in Japan and produces in Japan.
c. a firm that sells in Japan but produces in Australia.
d. no Australian producers.
Solution
a. A firm that sells in Australia but produces in Japan will benefit from an appreciation of the Australian dollar against the Japanese yen. This is because the firm will receive more yen for each Australian dollar it earns from sales. This will increase the firm's revenue in yen terms, which can then be used to cover production costs in Japan.
b. A firm that sells in Japan and produces in Japan will not directly benefit from an appreciation of the Australian dollar against the Japanese yen. This is because both its revenue and costs are in yen, so changes in the exchange rate will not affect its profitability.
c. A firm that sells in Japan but produces in Australia will be negatively affected by an appreciation of the Australian dollar against the Japanese yen. This is because the firm will receive fewer Australian dollars for each yen it earns from sales. This will decrease the firm's revenue in Australian dollar terms, which will make it more expensive to cover production costs in Australia.
d. No Australian producers will not benefit from an appreciation of the Australian dollar against the Japanese yen. This is because a stronger Australian dollar makes Australian goods more expensive for foreign buyers, which can reduce demand for these goods.
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