A decline in domestic output would cause a ________ in net exports and a ________ in the exchange rate.
A)rise; rise
B)rise; fall
C)fall; rise
D)fall; fall

Question

Quizplus · Accepted Answer

A decline in domestic output would lead to a decrease in imports (as domestic demand falls) and an increase in exports (as domestic producers seek to sell their goods abroad). This would result in a rise in net exports. A rise in net exports would lead to an appreciation of the exchange rate (as the demand for domestic currency increases).

A Decline in Domestic Output Would Cause a ________ in Net