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Impact of a Fall in a Country's Exchange Rate on a Firm

Question

Discuss whether a firm would benefit from a fall in its country’s exchange rate.

Category:

Firm Behavior and Strategies

Frequently asked question

Preview Answer

🍃Introduction:
- Brief explanation of the topic
- Thesis statement

Body:
I. Advantages of a weaker currency
A. Lower prices of exports
B. Increase demand for products
C. Raise sales/revenue
D. Increase profits
E. Increase size of market
F. Lower average costs of production
G. Higher home sales

II. Disadvantages of a weaker currency
A. Increase price of imports
B. Raise a firm's costs of production
C. Lower profits
D. Fall in revenue if demand for exports is price-inelastic
E. Uncertainty due to fall in exchange rate
F. No increase in sales due to recession in other countries
G. Poor quality of goods compared to competitors

III. Case studies/examples
A. Countries that benefited from a weaker currency
B. Countries that suffered from a weaker currency

IV. 👉Conclusion
A. Restate thesis statement
B. Summarize main points
C. Provide recommendations or future implications.

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