One euro can buy 1.0586 USD (6 Oct 2023). A European MC exports textile to the USA and examined the relationship between the % change in US textile imports and the % change in real exchange rate of USD on a quarterly basis. The estimated regression coefficient is 1.33. Suppose that the USD is depreciated against the euro by 1% on a yearly basis. Then,

• The new exchange rate on a quarterly basis is 1.0692 and US imports will increase by 1.33% one year later.
• The new exchange rate on a quarterly basis is 1.04805 and US imports will decrease by 1.33% one quarter later.
• The new exchange rate on a quarterly basis is 1.0692 and US imports will increase by 1.33% one quarter later.
• The new exchange rate on a quarterly basis is 1.06918 and US imports will increase by 1.33% one quarter later.