Complete currency pass-through arises when a 10 percent depreciation in the value of the dollar causes U.S.:
A) Import prices to fall by 10 percent
B) Import prices to rise by 10 percent
C) Export prices to rise by 10 percent
D) Export prices to rise by 20 percent

Question

Quizplus · Accepted Answer

Complete currency pass-through means that the full change in exchange rates is passed on to import and export prices. Therefore, a 10 percent depreciation in the value of the dollar would lead to a 10 percent increase in import prices, as foreign goods become more expensive for U.S. consumers. Export prices would not necessarily rise, as the increase in the price of U.S. goods may make them less competitive in foreign markets.

Complete Currency Pass-Through Arises When a 10 Percent Depreciation in the Value