Final answer:
Exchange rates matter for imports because they determine the cost of imported goods, with higher rates making imports cheaper and low rates making them more expensive (A). Exchange rate fluctuations can disrupt trade flows and affect economic stability, which is why some governments stabilize the rates.
Step-by-step explanation:
When it comes to imports, the exchange rate matters because it influences the cost of imported products. Specifically, if the exchange rate for a country's currency rises, the currency appreciates, and imports become cheaper for that country. Conversely, if the exchange rate falls, the currency depreciates, and imports become more expensive. When a country has a large portion of its economic activity tied to international trade, variations in exchange rates can significantly disrupt trade flows. For this reason, some governments or central banks may attempt to fix or stabilize exchange rates to prevent such disruptions and maintain economic stability.
Moreover, fluctuations in exchange rates can affect the aggregate demand in the economy, impacting both businesses and consumers. It is particularly challenging for firms and financial institutions like banks that engage in international trade or that provide services linked to exchange rates. Understanding these macroeconomic effects can highlight why monitoring and managing exchange rates is essential for a country's overall economic health.