If incomes rise rapidly in the United States and U.S.preferences for foreign goods strengthen,we would expect:

Question

Quizplus · Accepted Answer

If incomes rise rapidly in the United States and U.S. preferences for foreign goods strengthen, the demand for foreign goods will increase, leading to an increase in the demand for foreign currency, and thus causing the dollar to depreciate in value. This is because Americans will need to exchange more dollars for foreign currency to purchase the goods they desire, causing the value of the dollar to decrease relative to the foreign currency. Additionally, a weaker dollar would make US exports more competitive in foreign markets, leading to an increase in US exports.

If Incomes Rise Rapidly in the United States and U