Question

A depreciation of the US real exchange rate induces US consumers to buy: __________

a. more domestic goods and more foreign goods
b. fewer domestic goods and fewer foreign goods
c. more domestic goods and fewer foreign goods
d. fewer domestic goods and more foreign goods

Answer 1

c. more domestic goods and fewer foreign goods

Step-by-step explanation:

A depreciation of the US real exchange rate induces US consumers to buy more domestic goods and fewer foreign goods . A depreciation of the US real exchange rates would mean a weaker dollar.Thus, domestically produced items become cheaper and imported goods become relatively expensive.