Suppose that a 5% depreciation of the U.S. dollar raises the dollar price of a U.S. import Good by 5%. This situation would be characterized as a situation of __________ "pass- Through" (or "exchange-rate pass-through"), and U.S. consumers of the imported good Would spend a larger dollar amount on the imported good than they did before the Depreciation of the dollar if their demand for the good is __________.

Question

Quizplus · Accepted Answer

A 5% depreciation of the U.S. dollar raising the dollar price of a U.S. import good by 5% indicates a complete pass-through, where the full effect of the exchange rate change is reflected in the import price. If demand is inelastic, consumers will continue to buy the product despite the price increase, leading to a larger dollar expenditure on the imported good.

Suppose That a 5% Depreciation of the U