In 2002, $1 = 1 euro, and in 2006, $1 = 0.6 euro. If the price of a Ferrari was $125,000 in 2006, then:
A) U.S. consumers partially benefited, even though the dollar depreciated.
B) U.S. consumers paid the full price because of the depreciated dollar.
C) U.S. consumers benefited because of the appreciation of the dollar.
D) one can say that the J curve effect is not valid.

Question

Quizplus · Accepted Answer

U.S. consumers partially benefited because the price in euros decreased due to the dollar's depreciation, making the Ferrari relatively cheaper in dollar terms compared to if the exchange rate had remained the same as in 2002.

In 2002, $1 = 1 Euro, and in 2006, $1