Please explain in detail how you arrived at the correct answer. Thank you. 1. Ex
ID: 427215 • Letter: P
Question
Please explain in detail how you arrived at the correct answer. Thank you.
1. Exchange rate shifts that cause the Sing$ to be weaker versus the Brazilian real A. make the export of footwear from Asia-Pacific plants to Latin America less competitive and give rise to B. make the export of footwear from Asia-Pacific plants to Latin America less competitive and give rise to C. make the export of footwear from Asia-Pacific plants to Latin America more competitive and give rise to D. make the export of footwear from Asia-Pacific plants to Latin America less competitive and give rise to E. None of the above is accurate negative/favorable exchange rate cost adjustments positive/unfavorable exchange rate cost adjustments negative/favorable exchange rate cost adjustments negative/unfavorable exchange rate cost adjustmentsExplanation / Answer
Export of items from one country to another country is very much affected by corresponding exchange rate . A depreciation/ devaluation of one currency visa vis other currency makes exports of goods from the country of devaluing currency to other country more competitive.
In this case, for sake of example , we assume that initially 1 Singapore $ = 2.5 Brazilian Real
Let us also assume that due to weakening of Singapore $, 1.5 Singapore $ = 2.5 Brazilian Real.
Let us also assume that a pair of footwear costs $3 Singapore $.
From above equation value of 3 Singapore $ :
Initially : 7.5 Brazilian Real
Finally : 5 Brazilian Real
Above example thus illustrates tat weakening of Singapore $ makes export of footwear from asia Pacific region ( where Singapore is located ) to Latin American countries more competitive. The exchange rate adjustment to the production costs on all pairs shipped from Asia Pacific will be negative/favorable, thus reflecting the greater cost competitiveness of Asia – Pacific made footwear in markets where the currency is now stronger versus the Singapore $
ANSWER : C ) MAKE THE EXPORT OF FOOTWEAR FROM ASIA PACIFIC PLANTS TO LATIN AMERICA MORE COMPETITIVE AND GIVE RISE TO NEGATIVE / FAVORABLE EXCHANGE RATE COST ADJUSTMENTS
ANSWER : C ) MAKE THE EXPORT OF FOOTWEAR FROM ASIA PACIFIC PLANTS TO LATIN AMERICA MORE COMPETITIVE AND GIVE RISE TO NEGATIVE / FAVORABLE EXCHANGE RATE COST ADJUSTMENTS