Suppose the exchange rate in the year 2010 was 1 euro per dollar, and in 2017 the exchange rate increased to 2 euros per dollar. If the price of a German sweater was 50 euros in both years, the new dollar price in 2017 would be ____ and imports of German sweaters would ____.
A)$25; increase
B)$25; decrease
C)$100; increase
D)$100; decrease
E)$50; remain constant

Question

Quizplus · Accepted Answer

In 2010, the sweater cost $50 (50 euros at 1 euro per dollar). In 2017, with the exchange rate at 2 euros per dollar, the sweater costs $25 (50 euros / 2 euros per dollar). The lower price in dollars would likely increase imports.

Suppose the Exchange Rate in the Year 2010 Was 1