Question

ppleton Co., based in the United States, has costs from orders of foreign material that are lower than its foreign revenue. All foreign transactions are denominated in the foreign currency of concern. This firm would ____ a stronger dollar and would ____ a weaker dollar.

Answer 1

Answer:

The correct answer is: be adversely affected by; benefit from.

Explanation:

The first adverse effect of a higher dollar price is the difficulties in increasing North American exports, a situation that can be a drag on the economic recovery. On the other hand, by making imports cheaper, they could take away from the market of what is produced internally.

In addition, this trajectory of the dollar could also hinder the process of normalization of the Federal Reserve's monetary policy, since higher interest rates would be an additional incentive to improve the position of the greenback and further strengthen it.

Secondly, the advance of the dollar contributes to higher prices of raw materials in other currencies, a situation that tends to detract from their demand. Lower revenues from commodity sales make up an unfavorable context for emerging economies, especially in those nations whose export sectors are poorly diversified.

The third effect of the strength of that currency is a source of downward pressure especially for the currencies of emerging nations, which in turn hinders their economic recovery.