If the dollar appreciates in the foreign exchange market:
A) net exports will increase.
B) net exports will decrease.
C) net exports will be unaffected.
D) It is impossible to say how net exports will be affected without knowing how net capital outflow is affected.

Question

Quizplus · Accepted Answer

If the dollar appreciates in the foreign exchange market, it becomes more expensive for foreign countries to purchase goods and services from the United States. This will lead to a decrease in net exports as foreign demand for U.S. goods and services decreases.

If the Dollar Appreciates in the Foreign Exchange Market