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suppose the US dollar appreciates against the British pound. Explain the impact of this appreciation on...

suppose the US dollar appreciates against the British pound. Explain the impact of this appreciation on the US exports to the British market (increase or decrease and why) and the demand for US dollar in the dollar-pound foreign exchange market (increase or decrease and why)

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Answer - When the US dollars appreciate against the Bristish pound, this means that the US dollar has now become more expensive and more of pounds will be needed to buy it. Due to the US dollar becoming more expensive , its will also be costlier. Hence , US exports will decline to british market because of costlier US goods as a result of currency appreciation. When the US goods demand by British will decline , they will need lesser dollars. Hence due to appreciation , The Demand for US dollars will also decline.

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