Question
For a firm that exports to Germany from the US the revenue for the base year was 1,000 euros and the cost of goods sold
For a firm that exports to Germany from the US the revenue for the base year was 1,000 euros and the cost of goods sold was $800. The exchange rate for the base year was $1.20 per euro.
Over a year the inflation rate in Germany was 3% and the inflation rate in the US was 1%. The exchange rate remained constant at $1.20 per euro.
Assume the revenue increased at the German inflation rate and the cost of goods sold increased at the US inflation rate.
What was the approximate rate of change in the real profits for this firm?
A 3% increase | ||
A 2% increase | ||
A 2% decrease | ||
A 3% decrease |
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