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Ann [662]
3 years ago
8

"When the dollar appreciates, U.S." exports increase, while imports decrease. b. exports and imports increase. c. exports decrea

se, while imports increase. d. exports and imports decrease.
Business
1 answer:
Zina [86]3 years ago
5 0

Answer:

C) Exports decrease, imports increase

Explanation:

If the US dollar appreciates, the US dollar has now more value per unit of foreign currency than before. For example, suppose that today 1 US dollar buys 0.8 Euro, and tomorrow, Europe is hit by a financial crisis, and the US dollar appreciates, and buys 1.2 Euro. The US dollar has appreciated, has become more expensive, becomes now more euros are needed to buy 1 US dollar.

When the US dollar gains value, domestic goods become more expensive compared to foreign goods, and this promotes imports, and reduces exports.

This is the reason why China keeps a depreciated currency: China is an export economy and the cheap Chinese currency makes exports cheaper, and imports more expensive.

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