A UK trader exported goods to a Chinese trader at GBP 50,000. The exchange rate on the day of a transaction is GBP 0.250/CNY. The importer agreed to pay GBP 50,000 pounds after one month. Due to changes in the economic conditions in China, the CNY depreciates and the exchange rate moved to GBP 0.100/CNY on the settlement day. Which one of the following is the effect of the above foreign exchange rate movement on the Chinese trader? a. The time gap between transaction and settlement date increases the cash flow to the UK trader and decreasing operating profitability b. None of the options c. The time gap between transaction and settlement date increases operating profitability d. The time gap between transaction and settlement date decreases operating profitability
A UK trader exported goods to a Chinese trader at GBP 50,000. The exchange rate on the day of a transaction is GBP 0.250/CNY. The importer agreed to pay GBP 50,000 pounds after one month. Due to changes in the economic conditions in China, the CNY depreciates and the exchange rate moved to GBP 0.100/CNY on the settlement day. Which one of the following is the effect of the above foreign exchange rate movement on the Chinese trader? a. The time gap between transaction and settlement date increases the cash flow to the UK trader and decreasing operating profitability b. None of the options c. The time gap between transaction and settlement date increases operating profitability d. The time gap between transaction and settlement date decreases operating profitability
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter31: Open-Economy Macroeconomics: Basic Concepts
Section: Chapter Questions
Problem 8PA
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9-A UK trader exported goods to a Chinese trader at GBP 50,000. The exchange rate on the day of a transaction is GBP 0.250/CNY. The importer agreed to pay GBP 50,000 pounds after one month. Due to changes in the economic conditions in China, the CNY depreciates and the exchange rate moved to GBP 0.100/CNY on the settlement day. Which one of the following is the effect of the above foreign exchange rate movement on the Chinese trader?
a. The time gap between transaction and settlement date increases the cash flow to the UK trader and decreasing operating profitability
b. None of the options
c. The time gap between transaction and settlement date increases operating profitability
d. The time gap between transaction and settlement date decreases operating profitability
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