Question

The change in exchange rates would have a positive effect on U.S. firms that import parts for its products from​ Canada, U.S.​ consumers, and firms that export to Canada.
True / False.

Answer 1

Answer:

FALSE

Explanation:

The stimulus caused by exchange rate variations will differ for each group. If the dollar depreciates against the Canadian currency, it will be good for exporting companies, which will gain competitiveness, but it will be bad for companies that import Canadian inputs, as imports will become more expensive. If the dollar appreciates, that stimulus is reversed. Exporting companies will lose competitiveness while importers will buy cheaper products. For consumers, it will all depend on the type of product they are buying. In case of devaluation it will be more expensive to buy imported products, in case of appreciation it will be cheaper.