A(n)________ in U.S. prices will cause an increase in the demand for U.S. dollars and a(n)________ in the (per dollar)exchange rate.

Question

Quizplus · Accepted Answer

A decrease in U.S. prices will make U.S. goods and services cheaper compared to foreign goods and services. This will increase the demand for U.S. goods and services from foreign buyers, leading to an increase in demand for U.S. dollars. As the demand for U.S. dollars increases, the exchange rate will appreciate, meaning it will take fewer dollars to buy a foreign currency. Therefore, there will be an increase in the exchange rate.