CAPE MOB Unit 1 Practice Questions - CAPE Management Of Business Unit 1 Exam

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If the exchange rate of the Guyanese Dollar (GYD) depreciates significantly against the US Dollar (USD), what is the most likely impact on a Guyanese manufacturer that imports raw materials from the United States?

The cost of raw materials will decrease, leading to higher profit margins. The cost of raw materials will increase, leading to a rise in production costs. Imports of raw materials will become cheaper, stimulating production. The manufacturer's domestic selling prices will automatically fall due to exchange rate changes.

Correct Answer:

The cost of raw materials will increase, leading to a rise in production costs.

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