Question

The United States produces computers and sells them to Mexico. At the same time, Mexico produces cars and sells them to the United States. Suppose there is an appreciation in the dollar. This will​ cause:_________.A. A decrease in imports into the United Kingdom and an increase in exports to Mexico, which will cause an increase in aggregate demand and real GDP. B. An increase in imports into the United Kingdom and a decrease in exports to Mexico, which will cause a decrease in aggregate demand and real GDP. C. A decrease in imports into the United Kingdom and a decrease in exports to Mexico, which will cause a decrease in aggregate demand and real GDP. D. An increase in imports into the United Kingdom and an increase in exports to Mexico, which will cause an increase in aggregate demand and real GDP.

Answer 1

Answer:

An increase in imports into the United Statesand a decrease in exports to Mexico, which will cause a decrease in aggregate demand and real GDP.

Explanation:

Exchange rate is the rate at which one currency can be exchanged for another. When a currency appreciates it becomes stronger against the other currency.

For example if the dollar becomes stronger than the peso, the dollar will be able to buy more pesos than before. The pesos will also be able to buy less dollars than before.

As Mexican products are now cheaper there will be increased imports into the United States.

US goods will be more expensive for Mexico, so they will buy less of US goods. United States exports will reduce.

This will eventually lead to a reduction in aggregate sand and real GDP since US sale of US goods has declined.

Answer 2

Answer: B .An increase in imports into the United States and a decrease in exports to Mexico, which will cause a decrease in aggregate demand and real GDP

Explanation: Both the United state and Mexico are involved in international trade between the two countries in this scenario. So if there is a an appreciation in the Dollars there will be increased in importation into the United States, since fewer dollars will be required to import items. This will caused decrease in export to Mexico which will decreased aggregate demand and real GDP.