The BP curve shifts to the left when:
A)the exchange rate falls.
B)interest rates rise.
C)income rises.
D)imports increase.

Question

Quizplus · Accepted Answer

A decrease in the exchange rate reduces the price of domestic goods in foreign markets, making exports less expensive and more attractive to foreign buyers. This leads to an increase in exports and a shift of the BP curve to the right. Conversely, an increase in the exchange rate makes domestic goods more expensive in foreign markets, reducing exports and shifting the BP curve to the left.

The BP Curve Shifts to the Left When