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

Question

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

Quizplus · Accepted Answer

By producing more automobiles in the United States with U.S. materials and pricing them in dollars, the Japanese car manufacturer reduces its economic exposure to fluctuations in the exchange rate between the yen and the dollar. Closing down most of its plants in the United States would eliminate the benefit of producing cars with U.S. materials, relying completely on Japanese suppliers for its parts would not address the issue of exchange rate fluctuations, and pricing its exports in dollars would not address the issue of production costs affected by exchange rate fluctuations.

​Assume That a Japanese Car Manufacturer Exports Cars That Are

Assume That a Japanese Car Manufacturer Exports Cars That Are