You are the CEO of a firm considering opening a factory in Peru.If the dollar appreciated relative to the Peruvian peso,then other things the same
A)you'd find it took fewer dollars to build the factory.The building of the factory increases U.S.net capital outflow.
B)you'd find it took fewer dollars to build the factory.The building of the factory decreases U.S.net capital outflow.
C)you'd find it took more dollars to build the factory.If you still build the factory anyway, it will increase U.S.net capital outflow.
D)you'd find it took more dollars to build the factory.If you still build the factory anyway, it will decrease U.S.net capital outflow.

Question

Quizplus · Accepted Answer

When the dollar appreciates relative to the Peruvian peso, it takes fewer dollars to exchange for the same amount of pesos, making it cheaper to build the factory in Peru. Building the factory involves investing in Peru, which increases U.S. net capital outflow.

You Are the CEO of a Firm Considering Opening a Factory