The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2

-Suppose a U.S. importer agrees to pay a Japanese firm 55,000 yen for a shipment of goods. If the agreement is made when the exchange rate is $1 = ¥100, what is the change in the dollar value of the goods if the exchange rate changes to $1 = ¥110, on the payment-due date?
A)-$50
B)$550,000
C)-$550,000
D)$50
E)-$55,000

Question

The figure given below depicts the foreign exchange market for British pounds traded for U.S. dollars.Figure 22.2
 
-Suppose a U.S. importer agrees to pay a Japanese firm 55,000 yen for a shipment of goods. If the agreement is made when the exchange rate is $1 = ¥100, what is the change in the dollar value of the goods if the exchange rate changes to $1 = ¥110, on the payment-due date?
A)-$50 
B)$550,000 
C)-$550,000 
D)$50 
E)-$55,000

Quizplus · Accepted Answer

Initially, the cost in dollars is 55,000 yen / 100 yen/dollar = $550. If the exchange rate changes to $1 = ¥110, the cost becomes 55,000 yen / 110 yen/dollar = $500. The change in dollar value is $500 - $550 = -$50.

The Figure Given Below Depicts the Foreign Exchange Market for British