The sensitivity of a country's exports is _____ related to the real exchange rate.
A) directly
B) inversely
C) not
D) infrequently
E) sometimes

Question

Quizplus · Accepted Answer

The sensitivity of a country's exports is inversely related to the real exchange rate because as the real exchange rate increases (the domestic currency appreciates), exports become more expensive for foreign buyers, leading to a decrease in demand for those exports. Conversely, when the real exchange rate decreases (the domestic currency depreciates), exports become cheaper for foreign buyers, potentially increasing demand for those exports.

The Sensitivity of a Country's Exports Is _____ Related to the Real