When the real exchange rate decreases in the United States, then there is a(n) ______ in U.S. demand for U.S. goods and a(n) _________ in U.S. demand for Mexican goods.
A) decrease; increase
B) increase; decrease
C) increase; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

When the real exchange rate decreases in the United States, U.S. goods become cheaper relative to Mexican goods, leading to an increase in U.S. demand for U.S. goods and a decrease in U.S. demand for Mexican goods.

When the Real Exchange Rate Decreases in the United States