Question

Travis takes two trips to Ecuador. On his first trip, he finds that one US dollar is worth 25000 Ecuadorian Sucre. On his return trip, he finds that the dollar is now worth 26000 Ecuadorian Sucre. What is a LIKELY result of this change in exchange rates?

A) American Exports to Ecuador Increase
B) American Imports from Ecuador increase
C) There is not enough information to answer
D) Ecuadorians invest more in infrastructure

Answer 1

the answer is more americans will travel to Ecuador so B

Answer 2

The correct answer B) American imports from Ecuador would increase.

The result of this change in the exchange rates would be that American imports from Ecuador would increase.

The reason why America is going to import more products from Ecuador is because the products are cheaper for the American import company. The currency devaluation in Ecuador indicates that 1 dollar is worth 26,000 Ecuadorian Sucre (Ecuador’s currency). This means that the dollar is a much stronger currency and the value of the American dollar allows people to buy a lot of things at a very low price. American companies can import products for Ecuador at low prices and then sell them in American stores with good gains.

Another consequence of this difference of currencies is that American companies can invest more in Ecuador. They are going to pay less money to workers and their investments are going to produce more. Furthermore, traveling to Ecuador is very cheap, and American tourism can increase in the region.