Question

Would an increase in yuan in exchange for the dollar be good news or bad news for U.S. firms such as Apple and Yum Brands (which owns KFC and Pizza Hut) that have stores or restaurants in China? Briefly explain.

a) Good news, because they will earn more dollars when they convert an appreciated yuan into U.S. dollars.
b) Bad news, because sales in China are now worth less when converted to U.S. dollars.
c) Bad news, because goods produced by Chinese competitors become less expensive.
d) Good news, because the purchasing power of American consumers increases.

Answer 1

A stronger yuan in exchange for the US dollar would be bad news for US firms such as Apple and Yum Brands because their sales in China are worth less in US dollars and Chinese competitors' goods become less expensive.

Step-by-step explanation:

A stronger yuan in exchange for the US dollar would be bad news for US firms such as Apple and Yum Brands (which owns KFC and Pizza Hut) that have stores or restaurants in China because their sales in China are now worth less when converted to US dollars. When the yuan appreciates, it means that each yuan can be exchanged for more US dollars, resulting in lower profits for US firms when they convert their earnings in yuan back into dollars. Additionally, goods produced by Chinese competitors become less expensive, making it harder for US firms to compete in the Chinese market.