Suppose the French franc rises against the British pound but falls against the German mark.What happens to the prices of goods imported into France?
A)Both British and German goods fall in price.
B)Both British and German goods rise in price.
C)British goods rise in price while German goods fall in price.
D)British goods fall in price while German goods rise in price.

Question

Quizplus · Accepted Answer

When the French franc rises against the British pound, it means that it now requires fewer francs to purchase one pound, so British goods become relatively cheaper for the French consumers. On the other hand, when the franc falls against the German mark, it means that more francs are now required to purchase one mark, making German goods relatively more expensive for French consumers. Therefore, the prices of British goods fall while the prices of German goods rise, resulting in option D as the correct choice.

Suppose the French Franc Rises Against the British Pound but Falls