Question

Question 1

The dollar price of an imported good can be calculated as the:

	A.	Foreign price of the good.
	B.	Foreign price of the good divided by the dollar price of the foreign currency.
	C.	Foreign price of the good multiplied by the dollar price of the foreign currency.
	D.	Dollar price of foreign currency divided by the foreign price of the good.

Answer 1

Question 1:

Suppose domestic price of a good- P($) per unit.

Now commodity prices in foreign country= P( in foreign currency) per unit.

Now exchange rate or the dollar price of the foreign currency= P($)/ P(in foreign currency)= e

Now the dollar price of an imported good will be= exchange rate times the foreign price of the good i.e = [P(in $)/ P(in foreign currency)]* P(in foreign currency)

Hence the answer will be:

C. Foreign price of the good multiplied by the dollar price of the foreign currency.