If the price of a truck in the United States is $25,000, and the exchange rate between the dollar and the euro falls from $1.50 to $1.30 per euro, then the price of the American truck in the EU will
A) rise.
B) fall.
C) remain the same.
D) be irrelevant, because the EU will impose restrictions on imports from the United States.

Question

Quizplus · Accepted Answer

When the exchange rate falls from $1.50 to $1.30 per euro, it means that fewer euros are needed to buy the same amount of dollars. Therefore, the price of the American truck in euros will increase because it becomes more expensive for someone with euros to buy the truck priced in dollars.

If the Price of a Truck in the United States