Question

When the real exchange rate rises:

Answer 1

Answer:

When the real exchange rate rises D) exports will decrease and imports will increase.

Explanation:

Exchange rate -

Exchange rate is defined as the number of unit of one of the currency exchangeable for the one unit of another .

The change in the exchange rates can alter the international price of the goods as -

Hence ,  

If the value of dollar exchange rate rises , the relative price of the  domestic goods  will also rise while the relative price of the foreign goods and services will reduce .

Therefore ,

The change in relative prices will reduce U.S. exports and rises its imports.