Question

g If the U.S. real exchange rate appreciates, U.S. exports a. increase and U.S. imports decrease. b. decrease and U.S. imports increase. c. and U.S. imports both increase. d. and U.S. imports both decrease.

Answer 1

The answer is B.

Step-by-step explanation:

If dollar appreciates, imports become cheaper(decrease), meaning dollar will buy more of another foreign currency

because Americans will find foreign goods less expensive because they have to spend less for those goods and services in dollar.

In the same vein, exports rise(increase) or less profitable, causing the domestic demand to fall because foreigners will find American goods more expensive because they have to spend more for those goods and services in dollar