How does an increase in a country's exchange rate affect its balance of trade?
A)An increase in the exchange rate raises imports,reduces exports,and reduces the balance of trade.
B)An increase in the exchange rate reduces imports,raises exports,and reduces the balance of trade.
C)An increase in the exchange rate reduces imports,raises exports,and increases the balance of trade.
D)An increase in the exchange rate raises imports,reduces exports,and increases the balance of trade.

Question

Quizplus · Accepted Answer

An increase in the exchange rate makes the country's currency stronger, which causes imports to be cheaper and exports to be more expensive. Cheaper imports make it more attractive for consumers to buy goods from other countries, reducing demand for domestic goods and thus reducing exports. Therefore, an increase in the exchange rate raises imports, reduces exports, and reduces the balance of trade.

How Does an Increase in a Country's Exchange Rate Affect