The lower our real exchange rate is,the ______ expensive domestic goods are relative to foreign goods,and the ______ the demand is for net exports.
A) more; greater
B) more; smaller
C) less; greater
D) less; smaller

Question

Quizplus · Accepted Answer

A lower real exchange rate means that foreign goods become more expensive relative to domestic goods, making domestic goods relatively cheaper. This leads to an increase in demand for net exports as consumers are more likely to choose domestically produced goods over foreign goods.

The Lower Our Real Exchange Rate Is,the ______ Expensive Domestic