Question

What happens to exports (X), imports (M), and net exports (NX) if the exchange rate between the U.S. dollar and foreign currencies rises (i.e. if the U.S. dollar appreciates).

Answer 1

Export - Decrease

Imports - Increase

Net Exports - Decreases

Step-by-step explanation:

If the US dollar increases, it means that the value of American goods will be more expensive because they are valued in US$. This will reduce exports because people will buy less American goods because of this increase in price.

Imports on the other hand will increase because Americans will find foreign goods cheaper as they are able to buy more with the dollar which is now stronger.

Net Exports is calculated by subtracting imports from exports so with exports lower and imports higher, Net exports will decrease.