The real exchange rate generally has ______ relationship with aggregate expenditure.
A) a negative
B) a positive
C) no
D) a constant

Question

Quizplus · Accepted Answer

As the real exchange rate increases, foreign goods become relatively cheaper and domestic goods become relatively more expensive, leading to a decrease in aggregate expenditure on domestic goods and an increase in aggregate expenditure on foreign goods. Therefore, there is a negative relationship between the real exchange rate and aggregate expenditure.

The Real Exchange Rate Generally Has ______ Relationship with Aggregate