Suppose the Australian exchange rate falls from 90 yen per dollar to 80 yen per dollar. Australian exports will ________, Australian imports will ________, and Australian aggregate demand will________.
A)increase; decrease; increase
B)decrease; increase; decrease
C)decrease; increase; increase
D)increase; increase; increase

Question

Quizplus · Accepted Answer

When the exchange rate falls, Australian goods become cheaper for foreign buyers, leading to an increase in exports. Conversely, imports become more expensive, leading to a decrease in imports. This increase in net exports raises aggregate demand.

Suppose the Australian Exchange Rate Falls from 90 Yen Per