Suppose the exchange rate in the year 2001 was 1 euro per dollar,and in 2010 the exchange rate increased to 2 euros per dollar.If the price of a German sweater was 50 euros in both years,the new dollar price in 2010 would be ____ and imports of German sweaters would ____.
A)$25; increase
B)$25; decrease
C)$100; increase
D)$100; decrease
E)$50; remain constant

Question

Quizplus · Accepted Answer

In 2001, the sweater cost $50 (50 euros at 1 euro/dollar). In 2010, at 2 euros/dollar, the sweater costs $25 (50 euros / 2 euros per dollar). The lower dollar price would likely increase imports.

Suppose the Exchange Rate in the Year 2001 Was 1