An appreciation of the currency would tend to increase the production of _____ and reduce the production of ______.
A) tradable goods, nontradable goods
B) exports, tradable goods
C) cars, haircuts
D) nontradable goods, tradable goods
E) no change in the production of goods

Question

Quizplus · Accepted Answer

An appreciation of the currency makes imports cheaper and exports more expensive for foreign buyers. This tends to reduce the competitiveness of a country's tradable goods abroad, potentially reducing their production. Conversely, nontradable goods, which are not subject to international competition, may see an increase in production as the domestic economy adjusts.

An Appreciation of the Currency Would Tend to Increase the Production