Assume that a Japanese car manufacturer exports cars to UK dealerships, which are priced in yen. The demand for those cars declines when the yen is strong. The manufacturer also produces some cars in the UK with UK materials and those cars are priced in pounds. The manufacturer could reduce its economic exposure by:

Question

Quizplus · Accepted Answer

Producing more automobiles in the UK would reduce the manufacturer's economic exposure to yen fluctuations, as costs and revenues would be more aligned with the local currency, pounds.

Assume That a Japanese Car Manufacturer Exports Cars to UK