A real appreciation will tend to cause

Question

Quizplus · Accepted Answer

A real appreciation of a country's currency makes its goods more expensive to foreigners, thus reducing the demand for its exports. It also makes foreign goods cheaper for domestic consumers, increasing imports. This does not directly increase exports or reduce imports, nor does it increase net exports, which contradicts options A, B, and C. Therefore, the correct answer is D, as a real appreciation would likely reduce the demand for domestic goods by making them more expensive relative to foreign goods.

A Real Appreciation Will Tend to Cause