3. If Boeing obtains jet engines from the United Kingdom and the price of these

Question

3.         If Boeing obtains jet engines from the United Kingdom and the price of these engines is denominated in pounds, an appreciation of the dollar will lead to a _____ in the pound cost of an aircraft produced by Boeing and a _____ in the dollar cost of that aircraft, compared with the cost changes that would occur if all inputs for aircraft production came from the United States and were dollar-denominated.

            a.         smaller increase, smaller decrease

            b.         smaller increase, larger decrease

            c.         larger increase, smaller decrease

Explanation / Answer

b.         smaller increase, larger decrease

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