Terrance exports fine Persian rugs to the United States from Iraq. Iraq's currency, the dinar, has recently lost value relative to the dollar. Which statement best explains how the change in the value of the dinar would affect Terrance's business?
The profit on each rug sold would likely decrease because it would cost Terrance more in terms of U.S. dollars to produce each rug. Sales of the rugs would likely increase because U.S. importers would likely buy more of Terrance's rugs due to the dollar's increased purchasing power.

Question

Terrance exports fine Persian rugs to the United States from Iraq. Iraq's currency, the dinar, has recently lost value relative to the dollar. Which statement best explains how the change in the value of the dinar would affect Terrance's business?
 The profit on each rug sold would likely decrease because it would cost Terrance more in terms of U.S. dollars to produce each rug. Sales of the rugs would likely increase because U.S. importers would likely buy more of Terrance's rugs due to the dollar's increased purchasing power.

anonymous · Answer

The profit on each rug sold would increase because Terrance would be able to spend fewer dinar to produce each rug. Sales of his rugs in the United States would likely decrease. Buyers would be reluctant to buy rugs that were falling in value.

anonymous · Answer

medal given