Which of the following is true when the foreign GDP rises,assuming everything else remains constant?
A)The net exports decline,and exchange rate rises.
B)The net exports increase,and exchange rate rises.
C)The net exports decline,and exchange rate falls.
D)The net exports increase,and exchange rate falls.

Question

Quizplus · Accepted Answer

When foreign GDP rises, the demand for domestic goods and services increases, which leads to an increase in net exports. This increase in demand for domestic currency will also lead to an appreciation of the exchange rate. Therefore, the correct option is B, as net exports increase and exchange rate rises.

Which of the Following Is True When the Foreign GDP