Question

Assume the United States has the following​ import/export volumes and prices. It undertakes a major​ "devaluation" of the​ dollar, say 19% on average against all major trading partner currencies. What is the​ pre-devaluation and​ post-devaluation trade​ balance?

Initial spot exchange rate, $/fc	2.13
Price of exports, dollars ($)	19.5600
Price of imports, foreign currency (fc)	10.5000
Quantity of exports, units	140
Quantity of imports, units	160
Percentage devaluation of the dollar	19.00

Answer 1

1. Pre-devaluation trade balance would be the value at the intial spot exchange rate:

PARTICULARS		Amount in US $
Exports:	140 x 19.56	2738.40
Less:- Imports:	160 x 10.50 x 2.13	(3578.40)
Trade Balance		(840.00)

[assumed that $/fc = 2.13 means for 1 fc = 2.13 $]

2. Post-devaluation trade balance would be the value at the intial spot exchange rate:

Now devaluation means for every 1 fc means, more $ will be required to purchase 1 fc.

And hence, more than $2.13 will be required for 1 fc during imports.

PARTICULARS		Amount in US $
Exports:	140 x 19.56	2738.40
Less:- Imports:	160 x 10.50 x 2.13 x ( 1 + 0.19)	(4258.30)
Trade Balance		1519.90

Export valuation won't change as the value of exports are already in $ terms and as it is not mentioned that the "price" of exports has changed.