Question

Your artisan candle stick manufacturing business is doing well domestically, so you decide to expand it to other countries. As you would like to make many international sales, you hope:

a. the dollar will depreciate against other currencies.
b. foreign customers will bypass their domestic currencies and pay in dollars.
c. exchange rates will not change, to avoid uncertainty.
d. the dollar will appreciate against other currencies

Answer 1

A U.S. artisan candle stick manufacturing business expanding internationally would typically prefer the dollar to depreciate to make their products cheaper abroad, increasing sales. Appreciation of the dollar would make conversions back into dollars less profitable. Firms might desire payment in dollars or stable exchange rates to avoid fluctuations.

Step-by-step explanation:

When considering an expansion of an artisan candle stick manufacturing business to other countries, the desired exchange rate movement depends on the goal of the business.

If the business seeks to make many international sales, it would generally hope for the dollar to depreciate against other currencies.

This depreciation would make its products cheaper for foreign customers, potentially increasing sales. On the other hand, if the dollar were to appreciate, the foreign currency would buy fewer U.S. dollars, which would decrease the firm's profits when converted back into dollars.

Lastly, while some firms might prefer the certainty of unchanged exchange rates to avoid uncertainty, fluctuating exchange rates are a reality in international trade.

The ideal situation could involve foreign customers bypassing their domestic currencies and paying in dollars, which would shield the U.S. business from exchange rate fluctuations.