A U.S. company buys from a supplier whose currency is increasing against the dollar. Which of the following will the company most likely have to do if the purchasing price is expressed in the supplier's currency?
A) pay less in dollars than originally expected
B) pay more in dollars than originally expected
C) pay the same amount of dollars as originally expected
D) pay part of the transaction in the supplier's currency

Question

Quizplus · Accepted Answer

When the supplier's currency is increasing against the dollar, it means that each dollar buys less of the foreign currency. Therefore, if the purchasing price is expressed in the supplier's currency, the U.S. company will have to use more dollars to buy the same amount of the foreign currency to meet the purchasing price, leading to paying more in dollars than originally expected.

A US Company Buys from a Supplier Whose Currency Is Increasing