Question

Show the effect of dollar appreciation and depreciation with the euro on the price of U.S. exports and imports by updating table 15.2, as shown in the updated table.

R=EURO/$	DOMESTIC PRICE	JAN 09: R=0.76	JUNE 09: R=0.71	EFFECT ON EXPORTS (X) & IMPORTS (M)
U.S. EXPORTS: T.V.	$1,000	$760	$710
U.S. IMPORTS: EUROPEAN CARS	EURO $25,000
		JAN 08: R=0.68	JAN 09: R=0.76
U.S. EXPORTS: T.V.	$1,000

Answer 1

With Dollar depreciation, exports are likely to increase and so imports will fall. In the second case, the price of imports in euros is given by divding the euro amount by the exchange rate. Appreciation will increase imports and reduce exports as the price of exports for foreigners will rise

R=EURO/$	DOMESTIC PRICE	JAN 09: R=0.76	JUNE 09:	EFFECT ON EXPORTS (X) & IMPORTS (M)
			R=0.71
U.S. EXPORTS: T.V.	$1,000	Euros 760	Euros 710	EX rise and IM fall
U.S. IMPORTS: EUROPEAN CARS	EURO 25,000	25000/0.76 =$32894.74	25000/0.71 =$35211.27	EX rise and IM fall
		JAN 08:	JAN 09: R=0.76
		R=0.68
U.S. EXPORTS: T.V.	$1,000	Euro 680	Euro 760	EX fall and IM rise