Suppose 1 US dollar exchanges for 1 euro and the price of a

Suppose 1 U.S. dollar exchanges for 1 euro, and the price of a car imported from Germany is 50,000 euros. If next week the euro depreciates to 0.90 U.S. dollars to 1 euro, what will happen to the dollar price of the car for American consumers? Select one: a. It will rise from $50,000 to $55,556. b. It will rise from $45,000 to $50,000. C. It will fall from $55,556 to $50,000 d. It will fall from $50,000 to $45,000

Solution

Correct option: D. It will fall from $50000 to $45000

Explanation: depreciation in value of euros clearly state that, the before the U.S. could bought euro in $1, after the depreciation U.S. would pay less for one euro, i.e. $0.90.
Similarly, The U.S. was paying €50000(€50k*1) for one car, now after depreciation, US will have to pay €45000 (€50k*0.90)