A rise in the real exchange rate would typically result in all of the following EXCEPT

Question

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A rise in the real exchange rate would lead to an increase in the price of domestic goods relative to foreign goods, making domestic goods less competitive and reducing their demand abroad. This would result in a decrease in domestic exports (A) and a possible increase in domestic imports (B), leading to a decrease in net exports (D). However, an increase in the real exchange rate would make foreign goods relatively cheaper and more attractive to domestic consumers, increasing demand for them and likely leading to an increase in net exports (E).

A Rise in the Real Exchange Rate Would Typically Result