Exports will increase when there is

Question

Quizplus · Accepted Answer

A reduction in the real exchange rate (i.e. the value of the domestic currency falls relative to foreign currencies) makes exports cheaper for foreign buyers, leading to an increase in demand for domestic goods and an increase in exports. A reduction in domestic output (B) would lead to a decrease in exports, as there would be fewer goods and services to sell abroad. A reduction in foreign output (C) could potentially increase exports if it leads to increased demand for the domestic country's goods and services, but this is not always the case.

Exports Will Increase When There Is