As exchange rates change,they:

Question

Quizplus · Accepted Answer

As exchange rates change, the relative value of one currency to another will change, which affects the purchasing power between countries. For example, if the exchange rate of US dollars and Japanese yen changes from 1 USD = 110 JPY to 1 USD = 100 JPY, then the purchasing power of the US dollar has increased in Japan while the purchasing power of the Japanese yen has decreased in the US. This can potentially affect trade and investment decisions between the two countries. Option A is incorrect because a change in exchange rates can increase translation exposure as well as reduce it depending on the circumstances. Option B is incorrect because exchange rates can affect imports and exports as they can affect the cost of goods and services in different currencies. Option C is incorrect because exchange rates can affect the flow of funds between countries in terms of investment decisions and currency conversions.

As Exchange Rates Change,they