If for some reason Americans desired to decrease their purchases of foreign assets,then other things the same
A)both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency exchange would fall.
B)both the real exchange rate and the quantity of dollars exchanged in the market for foreign-currency would rise.
C)the real exchange rate would rise and the quantity of dollars exchanged in the market for foreign-currency would fall.
D)the real exchange rate would fall and the quantity of dollars exchanged in the market for foreign-currency would rise.

Question

Quizplus · Accepted Answer

If Americans desired to decrease their purchases of foreign assets, they would need to exchange less dollars for foreign currency in order to make those purchases. This decrease in demand for foreign currency would cause the exchange rate to rise (in this case, the real exchange rate), making foreign assets more expensive and therefore reducing the quantity of dollars exchanged in the foreign-currency exchange market.

If for Some Reason Americans Desired to Decrease Their Purchases