In the long run,both exports and imports tend to be
A)unresponsive to changes in exchange rates.
B)responsive to changes in exchange rates.
C)both responsive and unresponsive to changes in exchange rates.
D)none of the options

Question

Quizplus · Accepted Answer

In the long run, both exports and imports are generally responsive to changes in exchange rates. When a country's currency depreciates, its exports become relatively cheaper and more competitive, while its imports become relatively more expensive. This tends to increase exports and decrease imports over time, which can help to improve the country's trade balance. Similarly, when a country's currency appreciates, its exports become relatively more expensive and less competitive, while its imports become relatively cheaper. This tends to decrease exports and increase imports over time, which can worsen the country's trade balance. Therefore, both exports and imports tend to be responsive to changes in exchange rates in the long run.

In the Long Run,both Exports and Imports Tend to Be