Assume that the nominal exchange rate decreases by 4%.If prices (both domestic and foreign do not change),we know that
A)foreign goods are now relatively cheaper.
B)foreign goods are now relatively more expensive.
C)domestic goods are now relatively more expensive.
D)both A and C

Question

Quizplus · Accepted Answer

CWhen the nominal exchange rate decreases, it means that the domestic currency has appreciated relative to the foreign currency. This makes foreign goods more expensive in terms of the domestic currency (B), and simultaneously, domestic goods become relatively more expensive to foreign buyers (C).

Assume That the Nominal Exchange Rate Decreases by 4