Question

Suppose the dollar/franc exchange rate falls. Then

A)Canadian firms will export more to France.

B)the dollar is more valuable relative to the franc.

C)the franc is more valuable relative to the dollar.

D)French firms will import more from Canada into France

Please explain the answer

Answer 1

Suppose dollar/franc exchange rate falls, it means the dollar per unit of franc decrease .Now in exchange of one franc the people will get the US dollar less than before.

This will make France goods more cheaper for Canada and Canada goods more expensive for France, and lead to increase in import from France to Canada and decrease in exports from Canada to France.

A fall in exchange rate of dollar/franc (i.e., US dollar per unit if France franc).leads to increase in the dollar value relative to the franc.

So, the correct answer is an option (B)