Which of the following statements concerning the effects of fluctuating exchange rates on companies competing in foreign markets is true?
A) Fluctuating exchange rates do not pose significant risks to a company's competitiveness in foreign markets.
B) The advantages of manufacturing goods in a particular country are largely unaffected by fluctuating exchange rates.
C) Companies that are manufacturing goods in a particular country and are exporting much of what they produce are disadvantaged when that country's currency grows weaker relative to the currencies of the countries that the goods are being exported to.
D) Companies that are manufacturing goods in a particular country and are exporting much of what they produce are benefited when that country's currency grows weaker relative to the currencies of the countries that the goods are being exported to.
E) Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

Question

Quizplus · Accepted Answer

When a company manufactures goods in a particular country and exports much of what they produce, they benefit from a weaker currency of the country they are exporting to. This is because a weaker currency means that the goods become cheaper for foreign buyers, making them more competitive in the foreign market. Therefore, fluctuating exchange rates can have a significant impact on a company's competitiveness in foreign markets. Option A is incorrect as fluctuating exchange rates do pose a significant risk. Option B is incorrect as the advantages of manufacturing goods in a particular country can change with fluctuating exchange rates. Option C is incorrect as companies are disadvantaged when the country's currency grows stronger, not weaker. Option E is incorrect as it is discussing the impact on domestic companies, not companies competing in foreign markets.

Which of the Following Statements Concerning the Effects of Fluctuating