Question

Suppose gdp falls in the united states, but it doesn't fall in bahrain. what is the short-run impact of this change in gdp on the value of the u.s. dollar (usd), the value of the bahraini dinars (bhd), and u.s. net exports (based on the changing value of the u.s. dollar)?

Answer 1

Following short run impacts will be there when United States GDP falls and Bahrain GDP does not.

The value of the US dollar will depreciate: US dollar will depreciate relative to Bahrain dinar.

The value of the Bahrain dinar will appreciate: Bahrain dinar will appreciate relative to US dollar.

The exports of United States will increase: Exports will increase because US products will become cheaper because of fall in value of US dollar.