How will the exchange rate (foreign currency per dollar)respond to a decrease in the relative rate of productivity growth in the United States in the long run?

Question

Quizplus · Accepted Answer

A decrease in the relative rate of productivity growth in the United States means that the US economy is becoming less efficient compared to other countries. This will lower the demand for US goods and services, and therefore decrease the demand for the US dollar, resulting in a fall in the exchange rate. This effect will be seen in the long run once the markets have fully adjusted to the new information about the US's productivity growth.

How Will the Exchange Rate (Foreign Currency Per Dollar)respond to a Decrease