Question

When exchange rates are defined as foreign currency per dollar and foreign goods per US goods, the ability to profit by purchasing wheat in the United States and selling it in China implies that the ________.

1) exchange rate is favorable for the United States
2) exchange rate is favorable for China
3) exchange rate is equal for the United States and China
4) exchange rate is not relevant in this situation

Answer 1

The ability to profit by purchasing wheat in the United States and selling it in China implies that the exchange rate is favorable for the United States.

Step-by-step explanation:

The ability to profit by purchasing wheat in the United States and selling it in China implies that the exchange rate is favorable for the United States. When the exchange rate is favorable for the United States, it means that the U.S. dollar is strong compared to the Chinese yuan. This means that one U.S. dollar can buy more Chinese yuan, making it cheaper to purchase wheat in the United States and sell it in China.