If the goods' money prices do NOT change, an appreciation of the dollar against the pound
A) makes British sweaters cheaper in terms of American jeans.
B) makes British sweaters more expensive in terms of American jeans.
C) doesn't change the relative price of sweaters and jeans.
D) makes American jeans cheaper in terms of British sweaters.
E) makes British jeans more expensive in Britain.

Question

Quizplus · Accepted Answer

An appreciation of the dollar means that it can buy more pounds than before. If the prices of goods do not change, this means that the British sweater still costs the same amount in pounds. However, since each dollar can buy more pounds, the sweater becomes cheaper in terms of dollars. Therefore, British sweaters are cheaper in terms of American jeans.

If the Goods' Money Prices Do NOT Change, an Appreciation