If the price levels in the United States and in France are unchanged, but the nominal exchange rate (euro per U.S. dollar) falls, then the U.S. dollar
A)depreciates and so U.S.net exports falls.
B)depreciates and so U.S.net exports rises.
C)appreciates and so U.S.net exports falls.
D)appreciates and so U.S.net exports rises.

Question

Quizplus · Accepted Answer

When the nominal exchange rate (euro per U.S. dollar) falls, it means that fewer euros can be exchanged for a dollar, indicating that the U.S. dollar has depreciated relative to the euro. A weaker dollar makes U.S. goods cheaper for Europeans, likely increasing U.S. exports and decreasing imports, thus increasing U.S. net exports.

If the Price Levels in the United States and in France