Which of the following will not occur when the dollar price of U.S. goods increases relative to the dollar price of foreign goods?
A)the supply curve of dollars into the foreign exchange market will shift to the right.
B)U.S. consumers will substitute foreign products for domestic goods.
C)the demand curve of dollars into the foreign exchange market will shift to the right.
D)imports will increase.

Question

Quizplus · Accepted Answer

When the dollar price of U.S. goods increases relative to the dollar price of foreign goods, it makes U.S. goods more expensive for both domestic and foreign consumers. This leads to a decrease in demand for U.S. goods from abroad, which would shift the demand curve for dollars in the foreign exchange market to the left, not to the right, as fewer people need dollars to buy U.S. goods. Choices A, B, and D are all consequences of the increased price of U.S. goods relative to foreign goods, making choice C the incorrect statement.

Which of the Following Will Not Occur When the Dollar