Which of the following conditions leads to the greatest exchange rate pass-through?
A) pricing to market by exporters
B) a small open economy
C) fixed exchange rates
D) a wide assortment of import-competing domestic goods
E) "dollarization" and currency unions, in which different nations adopt the same currency

Question

Quizplus · Accepted Answer

A small open economy is more susceptible to exchange rate fluctuations, leading to a higher exchange rate pass-through as prices of imported goods are more directly affected by changes in exchange rates.

Which of the Following Conditions Leads to the Greatest Exchange