A rise in domestic productivity tends to __________ domestic prices and causes the dollar to __________ relative to foreign currencies.

Question

Quizplus · Accepted Answer

A rise in domestic productivity makes goods and services cheaper to produce, which tends to lower domestic prices. Lower prices can make domestic goods more attractive to foreign buyers, increasing demand for the domestic currency to pay for these goods, which causes the currency to appreciate.

A Rise in Domestic Productivity Tends to __________ Domestic Prices