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Assume that prices adjust slowly (fixed in the short run), so that purchasing power does not...

Assume that prices adjust slowly (fixed in the short run), so that purchasing power does not hold even for easily tradable baskets.

The US dollar depreciates relative to the Canadian dollar. Goods are getting cheaper in __________. What is the effect on US Net Exports? (increase or decrease or no change)

The Japanese Yen appreciates relative to the Chinese Yuan. Goods are getting cheaper in __________. What is the effect on Japanese Net exports? (increase or decrease or no change)

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Answer #1

The US dollar depreciates relative to the Canadian dollar. Goods are getting cheaper in USA. What is the effect on US Net Exports? Increases.
Deprecition of US dollar means that it is now cheaper to buy US dollars and hence US goods. So US exports will increase.

The Japanese Yen appreciates relative to the Chinese Yuan. Goods are getting cheaper in China.. What is the effect on Japanese Net exports? Decrease
As Japanese Yen appreciates, the Chinese Yuan depreciates. This means Chinese goods become cheaper and hence Chinese exports rise and Japanese exports fall.

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