If a U.S. firm's sales in Australia are much greater than its cost of goods sold in Australia, the appreciation of the Australian dollar has a ____ impact on the firm's ____.

Question

Quizplus · Accepted Answer

When the Australian dollar appreciates, it means that each Australian dollar has increased in value relative to the US dollar. This leads to an increase in the US firm's gross profit because it now receives more US dollars for each unit of goods sold in Australia, while the cost of goods sold remains the same. The appreciation of the Australian dollar does not directly affect the firm's interest expenses.

If a US Firm's Sales in Australia Are Much Greater Than Its