Question

Everything else held constant, when a country's currency appreciates, the country's goods abroad become ________ expensive and foreign goods in that country become ________ expensive. Question 3 options: A) more; more B) less; more C) less; less D) more; less

Answer 1

D) more; less

Step-by-step explanation:

When the currency of a nation appreciates, its domestically produced goods and services become expensive in the international market. Importers need to convert their currency into the exporter's currency to facilitate international payments. If the currency of the exporting nation appreciates, importers will use a high quantity of their currency to convert to the exporter's currency. In other words, the exchange rate will favor the exporter.

Because importers require a larger amount of their currency to make payments, the exported goods will be expensive in the importers country. A strong currency makes exports expensive. Imports will be cheaper as importers will use fewer quantities of strong currency to make international payments.