An increase in the real exchange rate will tend to _________ exports and ___________ imports.

Name: An increase in the real exchange rate will tend to _________ exports and ___________ imports.
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Quizplus · Accepted Answer

An increase in the real exchange rate makes the domestic goods more expensive relative to the foreign goods. As a result, the demand for domestic goods decreases, while the demand for foreign goods increases. This leads to a decrease in exports and an increase in imports. Hence, the correct answer is D.

An Increase in the Real Exchange Rate Will Tend to _________