The exchange rate between U.S. Dollar and Argentinian Peso is $1 = 125 Pesos. Inflation rate in USA is 8.6% and in Argentinal is 60.2%. In 2021, U.S. goods exports to Argentina were $7.7 billion; imports were $5.1 billion. The U.S. trade surplus with Argentina was $2.6 billion. Explain how the "inflation differential" between the two countries will affect trade. Will USA see an increase in trade surplus?

The exchange rate between U.S. Dollar and Argentinian Peso is $1 = 125 Pesos. Inflation rate in USA is 8.6% and in Argentinal is 60.2%. In 2021, U.S. goods exports to Argentina were $7.7 billion; imports were $5.1 billion. The U.S. trade surplus with Argentina was $2.6 billion. Explain how the "inflation differential" between the two countries will affect trade. Will USA see an increase in trade surplus?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter11: Foreign Exchange, Trade, And Bubbles

Section: Chapter Questions

Problem 6MC

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