All other things unchanged, a lower exchange rate
A) increases exports, imports, and aggregate demand.
B) decreases exports, imports, and aggregate demand.
C) increases exports, decreases imports, increases net exports and aggregate demand.
D) decreases exports, increases imports, decreases net exports and aggregate demand.

Question

Quizplus · Accepted Answer

A lower exchange rate makes exports cheaper and more attractive to foreign buyers, thus increasing exports. At the same time, imports become more expensive for domestic buyers, leading to a decrease in imports. This leads to an increase in net exports and aggregate demand as exports increase while imports decrease.

All Other Things Unchanged, a Lower Exchange Rate