Assume that labor productivity growth is slower in the United States than in its trading partners.Given a system of floating exchange rates, the impact of this growth differential for the United States will be
A) increased exports and an appreciation of the dollar.
B) increased exports and a depreciation of the dollar.
C) increased imports and an appreciation of the dollar.
D) increased imports and a depreciation of the dollar.

Question

Quizplus · Accepted Answer

Slower labor productivity growth in the United States compared to its trading partners would result in higher costs of production in the US and lower competitiveness. This would lead to an increase in imports and a depreciation of the dollar.

Assume That Labor Productivity Growth Is Slower in the United