- This topic has 12 replies, 5 voices, and was last updated 7 years, 11 months ago by .
-
Topic
-
The U.S. inflation rate is expected to be 5% per annum while the Italian lira is expected to depreciate against the U.S. dollar by 10% during the same period. During the next year, an Italian firm importing from its U.S. parent can expect its lira cost for these imports to:
A.
decrease by about 5%.
B.
increase by about 5%.
C.increase by about 15%.
D.
decrease by about 15%.
correct answer is C. increase by 15% and why not B?
I am confused because when US inflation causes US $ to depreciate by 5% and Italian Lira depreciated by 10% then
shouldn’t the cost should go up by 5% option B.?
Please help!
Viewing 12 replies - 1 through 12 (of 12 total)
Viewing 12 replies - 1 through 12 (of 12 total)
- You must be logged in to reply to this topic.