When the yuan-dollar real exchange rate depreciates,________.

Question

Quizplus · Accepted Answer

When the yuan-dollar real exchange rate depreciates, it means the yuan has lost value relative to the dollar. This makes Chinese goods cheaper for Americans (increasing U.S. imports from China) and American goods more expensive for the Chinese (decreasing U.S. exports to China). As a result, U.S. net exports to China increase (because the U.S. is buying more from China relative to what it sells to China), while Chinese net exports to the United States decrease (because China is selling more to the U.S. relative to what it buys from the U.S.).

When the Yuan-Dollar Real Exchange Rate Depreciates,________