Question

Concerning the currency exchange rate, a higher price for the dollar will __________.

Group of answer choices

make foreign goods cheaper and U.S. goods more expensive

make foreign goods more expensive and U.S. goods cheaper

reduce U.S. imports

increase U.S. exports

Answer 1

ANSWER : (a) make foreign goods cheaper and U.S. goods more expensive

When there is a change in currency exchange rate, it also leads to changes in international prices of goods and services.

As given in the question, there is a higher price for the dollar, it means that the currency has appreciated. When a country's currency appreciates it leads to;

• Relative increase in domestic price of goods and services : As dollar value increases, the goods produced domestically also increases. This lead to fall in exports because, foriegners find US goods more expensive as they have to pay more of the goods in US dollars
• Relative decrease in foreign price of goods and services : As dollar value increases, US goods become more expensive, the imports for those goods will increase in the US market, and thus the prices of goods in foreign will decrease.