Question

If the value of the US dollar increases relative to other currencies (exchange rate increases), what will be the effect on net exports for the United States?

Answer 1

If the value of the US dollar increases relative to other currencies then it implies that the US dollar has appreciated relative to other currencies, and, now the people who are interested in importing the goods and services from the US have to pay the higher price for the US goods and services, therefore, they will reduce the demand for the US goods and services which will lead to falling in the net exports. Therefore, we can say that the net exports will fall as a result.