An increase in the U.S. dollar exchange rate means foreigners must payQuestion 17Answera.more for dollars and more for U.S. exports.b.less for dollars and more for U.S. imports.c.more for dollars and less for U.S. exports.d.less for dollars and less for U.S. exports.
Question
An increase in the U.S. dollar exchange rate means foreigners must payQuestion 17Answera.more for dollars and more for U.S. exports.b.less for dollars and more for U.S. imports.c.more for dollars and less for U.S. exports.d.less for dollars and less for U.S. exports.
Solution
The correct answer is a. more for dollars and more for U.S. exports.
Here's why:
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An increase in the U.S. dollar exchange rate means that the value of the U.S. dollar has risen relative to other currencies.
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This means that it takes more of a foreign currency to buy one U.S. dollar.
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Therefore, foreigners must pay more for dollars.
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U.S. exports become more expensive for foreigners because they are priced in U.S. dollars. When the value of the U.S. dollar rises, the price of U.S. exports in terms of foreign currency also rises.
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Therefore, foreigners must also pay more for U.S. exports.
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