Suppose that the United States and Spain both produce cognac and handbags. In the United States, cognac sells for $20 a bottle and handbags sell for $80. In Spain, cognac sells for 30 euros a bottle and handbags sell for 40 euros. If the current exchange rate is 0.8 euro to the dollar, then
A. the United States will import handbags from Spain and Spain will import cognac from the United States.
B. the United States will import both handbags and cognac from Spain.
C. Spain will import both handbags and cognac from the United States.
D. the United States will import cognac from Spain and Spain will import handbags from the United States.
Answer: A
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