Assume that Ford Motor Company obtains all of its inputs in the United States and all of its costs are denominated in dollars.A depreciation 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

A depreciation of the dollar's exchange value would make Ford's products relatively cheaper for foreign buyers, thus enhancing its international competitiveness. This is because foreign buyers can obtain Ford's products at a relatively lower price due to the weakened exchange rate of the dollar. Since all of Ford's inputs and costs are denominated in dollars, it won't face any additional costs due to the depreciation of the dollar's exchange value.

Assume That Ford Motor Company Obtains All of Its Inputs