Question

Assume the Chilean peso is decreasing in exchange value compared to the U.S. dollar. Who will benefit most in this situation? A Chilean company that imports oil from Venezuela A Chilean family visiting relatives in the United States A Chilean exporter who sells fruits and vegetables to the U.S. A Chilean importer who brings American cars to Chile

Answer 1

The answer is a Chilean Exporter who sells fruits and vegetables.

Answer 2

The correct answer is C.

The exchange rate provides the amount of one currency that has to be provided (price) in order to obtain one unit of a different currency. If the exchange rates of the Chilean peso decreases, it means that it is depreciating against the dolar, and that more pesos will have to paid to get one dollar.

This is perjudicial for Chilean importers of US products, who have to change their pesos into dollars to buy the products in the US, and they will have to provide more pesos than before to get each individual dollar. The same happens for Chilean people who travel to the US and need to exchange their pesos for dollars.

On the other hand, Chilean exporters are benefited, because their products have become relatively cheaper for US consumers, that will demand a greater quantity than before. Therefore, Chilean exporters will increase their sales and profits.