Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.An appreciation of the dollar's exchange value:
A) Enhances its international competitiveness
B) Worsens its international competitiveness
C) Does not affect its international competitiveness
D) None of the above

Question

Quizplus · Accepted Answer

An appreciation of the dollar's exchange value would make Ford products more expensive in foreign markets, making them less competitive internationally. This is because the strengthening of the dollar makes foreign currencies weaker in comparison, causing the prices of goods in foreign currencies to rise. Therefore, an appreciation of the dollar's exchange value worsens Ford's international competitiveness.

Assume That Ford Motor Company Obtains All of Its Inputs