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

Question

Quizplus · Accepted Answer

A fall in the real exchange rate would make domestic goods relatively cheaper, leading to an increase in domestic exports (choice A), a decrease in domestic imports (choice B), and domestic goods becoming more competitive (choice C). However, a fall in the real exchange rate would actually lead to an increase in net exports (choice E), as the increase in exports would outweigh the decrease in imports. Therefore, the correct answer is D, as a fall in the real exchange rate would not lead to a decrease in net exports.

A Fall in the Real Exchange Rate Would Typically Result