An increase in the real exchange rate will tend to ________ exports and to ________ imports.
A)increase; decrease
B)increase; increase
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

An increase in the real exchange rate means a country's currency can buy more in foreign markets. Thus, exports decrease and imports increase when the real exchange rate rises.

An Increase in the Real Exchange Rate Will Tend to ________