The impact of appreciation of domestic currency on imports and exports.

Question

As domestic currency appreciates, we would expect a. Trade deficit to decrease. b. Trade deficit to increase. c. Imports to decrease. d. Exports to increase.

Answer 1

Question

Chapter 19, Problem 2CQQ

To determine

The impact of appreciation of domestic currency on imports and exports.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Students have asked these similar questions

As domestic currency appreciates, we would expect a. Trade deficit to decrease. b. Trade deficit to increase. c. Imports to decrease. d. Exports to increase.

When the relative price of a country’s goods is high, then over time the relative price tends to_____ and the country’s currency _______. a. rise, appreciates b. rise, depreciates c. fall, appreciates d. fall, depreciates A temporary increase in transportation costs between the US and the UK that cause the relative price of US goods to jump, will cause international investors to expect a future ______of the dollar that causes US real interest to _______those in the UK. a. appreciation, exceed b. appreciation, be less than c. depreciation, exceed d. depreciation, be less than

Draw a demand for dollars curve. Label it D. Draw a supply of dollars curve. Label it S. Draw a point at the equilibrium quantity and equilibrium exchange rate. Exchange rate (U.S. cents per Canadian dollar) 120- 110- Draw an arrow between the D and S curves that indicates a price at which there is a surplus of dollars. Label it. 100- 90- 80- 70- 60- 50- 20 50 70 30 40 60 80 Quantity (billions of Canadian dollars per day) >>> Draw only the objects specified in the question. Selected: Delete Clear none