Suppose there is a real appreciation.This real appreciation is more likely to cause a reduction in net exports when

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Quizplus · Accepted Answer

A real appreciation typically makes exports more expensive for foreign buyers and imports cheaper for domestic buyers. Therefore, a reduction in net exports is more likely to occur when both exports and imports are relatively sensitive to price changes (i.e. elasticity of demand is high), making the impact of price changes more pronounced.

Suppose There Is a Real Appreciation