BUSINESS ADMINISTRATION
STRATEGIC MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Exporters benefit when the currency of the country where the outputs are produced gets weaker. Domestic firms, who face the pressure of low cost importation, benefit from the weakening of their currency compared to currency of countries where imported goods are produced.
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Domesitc firms benefit from the weakening of their currency compared to currency of countries where imported goods are produced
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Exporters benefit when the currency of the country where the outputs are produced increases
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Domestic firms are weakened when their currency, compared to currency of countries where imported goods are produced, increases
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Detailed explanation-1: -A weak currency may help a country’s exports gain market share when its goods are less expensive compared to goods priced in stronger currencies. The increase in sales may boost economic growth and jobs while increasing profits for companies conducting business in foreign markets.
Detailed explanation-2: -In general, a weaker currency makes imports more expensive, while stimulating exports by making them cheaper for overseas customers to buy. A weak or strong currency can contribute to a nation’s trade deficit or trade surplus over time.
Detailed explanation-3: -A currency depreciates in value, or weakens, when it can buy less of a foreign currency than previously. Similarly, just because a country’s currency has weakened does not mean that everyone in the country is worse off (see the boxed insert).
Detailed explanation-4: -Currency devaluations can be used by countries to achieve economic policy. Having a weaker currency relative to the rest of the world can help boost exports, shrink trade deficits and reduce the cost of interest payments on its outstanding government debts.