A decrease 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

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

A Decrease in the Real Exchange Rate Will Tend to ________