Economics Exchange Rates Questions
The impact of exchange rate changes on multinational corporation profits can be both positive and negative.
When a multinational corporation's domestic currency strengthens against foreign currencies, it can lead to lower profits. This is because the value of the corporation's foreign earnings decreases when converted back into the stronger domestic currency. Additionally, the corporation's products may become more expensive in foreign markets, leading to a decrease in sales and profits.
On the other hand, when a multinational corporation's domestic currency weakens against foreign currencies, it can lead to higher profits. This is because the value of the corporation's foreign earnings increases when converted back into the weaker domestic currency. Additionally, the corporation's products may become more affordable in foreign markets, leading to an increase in sales and profits.
Overall, the impact of exchange rate changes on multinational corporation profits depends on the specific circumstances and the extent to which the corporation is exposed to foreign currency fluctuations.