An increase in the real exchange rate
A) makes imports more expensive.
B) makes imports less expensive.
C) does not affect import values.
D) always makes the number of imports rise.
E) makes domestic consumers spend more on only foreign imports.

Question

Quizplus · Accepted Answer

An increase in the real exchange rate means that the currency of the country has appreciated. This means that the country's exports become more expensive for foreign buyers and imports become expensive for domestic buyers. Therefore, choice A is correct.

An Increase in the Real Exchange Rate