Assume that General Motors employs labor and materials, whose costs are denominated in dollars, in the production of automobiles.If the dollar's exchange value depreciates by 10 percent against the yen, the yen-denominated cost of a GM vehicle rises by 10 percent.

Question

Quizplus · Accepted Answer

A weaker dollar means it takes more dollars to buy the same amount of yen, so GM's costs in yen will increase. This will translate into a higher cost of production for GM vehicles, leading to a price increase for consumers.

Assume That General Motors Employs Labor and Materials, Whose Costs