Exchange rate-imports based on the difference in inflation

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Reference no: EM131193646

Suppose the exchange rate between the United States and China changed from 1USD=6.6CNY to 1USD=6CNY. In addition, there is sudden inflation in the United States but, but not in China.

a. What do you expect to happen to US exports and Chinese imports based on the change in exchange rate (all else equal)?

b. What do you expect to happen to US exports and Chinese imports based on the difference in inflation (all else equal)?

c. You are a US producer of the IPhone and are exporting them to China. Please explain what you prefer to happen to the US/CNY exchange rate as well as relative inflation between the US and China?

Reference no: EM131193646

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