An appreciation of the Australian real exchange rate _____ the quantity of dollars demanded in the market for foreign-currency exchange.
A)reduces
B)increases
C)leaves unchanged
D)could have any effect on

Question

Quizplus · Accepted Answer

When the Australian real exchange rate appreciates, it becomes relatively more expensive to buy Australian goods and services with foreign currency. This makes Australian exports less attractive to foreign buyers and reduces demand for Australian dollars, resulting in a decrease in the quantity of dollars demanded in the foreign exchange market.

An Appreciation of the Australian Real Exchange Rate _____ the Quantity