In the market for foreign-currency exchange in the open-economy macroeconomic model,a higher U.S.real exchange rate makes
A)U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars supplied.
B)U.S.goods more expensive relative to foreign goods and reduces the quantity of dollars demanded.
C)foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars supplied.
D)foreign goods more expensive relative to U.S.goods and reduces the quantity of dollars demanded.

Question

Quizplus · Accepted Answer

A higher U.S. real exchange rate makes U.S. goods more expensive relative to foreign goods, which reduces the quantity of dollars demanded as foreign buyers purchase fewer U.S. goods.

In the Market for Foreign-Currency Exchange in the Open-Economy Macroeconomic