Info Gae

Lilliputia is a quiet place, and nothing at all actually happened during the year. As a result, net income was zero (before consideration of exchange rate changes). However, the exchange rate did change to 4 gullivers = $1 purely because the Lilliputian inflation rate is much higher than the U.S. inflation rate.

Because nothing happened, the accounting ending balance sheet in gullivers is the same as the beginning one. However, if we convert it to dollars at the new exchange rate, we get:

Assets

$250

Liabilities

$125

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