Question

When it comes to exports, why does exchange rate matter? A. Because it determines the color of products.

B. Because it affects the cost of imported goods.
C. Because it influences the size of export containers.
D. Because it determines the language used in export documentation.

Answer 1

The exchange rate matters for exports because it affects the cost of imported goods. When the exchange rate increases, imported goods become more expensive, leading to a decrease in their demand and an increase in demand for domestically produced goods, including exports. Conversely, if the exchange rate decreases, imported goods become cheaper, leading to an increase in their demand and a decrease in demand for domestically produced goods, including exports.

Step-by-step explanation:

The exchange rate matters in relation to exports because it affects the cost of imported goods.

When the exchange rate of a country's currency increases, it makes imported goods more expensive. This can lead to a decrease in the demand for those goods and an increase in the demand for domestically produced goods, including exports.

Conversely, when the exchange rate decreases, it makes imported goods cheaper, which can lead to an increase in the demand for those goods and a decrease in the demand for domestically produced goods, including exports.