Question

If the nominal exchange rate is expressed as foreign currency per dollar, which of the following would make Americans more willing to buy Italian goods?

1) A decrease in the nominal exchange rate
2) An increase in the nominal exchange rate
3) No change in the nominal exchange rate
4) Cannot be determined without additional information

Answer 1

A decrease in the nominal exchange rate would make Americans more willing to buy Italian goods.

Step-by-step explanation:

A decrease in the nominal exchange rate would make Americans more willing to buy Italian goods. When the nominal exchange rate decreases, it means that it takes fewer dollars to purchase a unit of foreign currency. In this case, it would mean that it takes fewer dollars to purchase Italian currency.

As a result, Italian goods become relatively cheaper for Americans, making them more willing to buy Italian goods.