Question

The lower the real exchange rate is (defined as the foreign price of domestic currency), the ______ expensive domestic goods are relative to foreign goods, and the ______ the demand is for net exports.

Answer 1

Answer:

less, greater

Explanation:

Foreign exchange can be defined as the foreign price of a domestic currency.

When the foreign exchange rate is low, it means that the domestic currency has a higher purchasing power and can be said to be strong. This makes domestic goods and services cheaper compared to imported goods. This in turn means that there will be a greater demand for exportation.

Cheers.