If the U.S. real exchange rate decreases, U.S. imports will fall and U.S. exports will rise.

Question

Quizplus · Accepted Answer

A decrease in the U.S. real exchange rate means that the U.S. dollar has depreciated against other currencies, making U.S. exports cheaper and more attractive to foreign buyers. At the same time, U.S. imports become relatively more expensive, reducing their demand. Therefore, U.S. imports will fall while U.S. exports will rise, resulting in a trade surplus.

If the US Real Exchange Rate Decreases, U