The current account increases when
A) real exchange rate decreases.
B) real exchange rate increases.
C) disposable income increases.
D) exports fall.
E) domestic prices fall.

Question

Quizplus · Accepted Answer

An increase in the real exchange rate makes domestic goods cheaper for foreigners and foreign goods more expensive for domestic consumers, leading to an increase in exports and a decrease in imports, thus improving the current account.

The Current Account Increases When