If the U.S. dollar becomes stronger in international foreign exchange markets, imported goods become less expensive. One immediate result of this is that
A) net exports decrease.
B) net exports increase.
C) domestic employment rises.
D) real Gross Domestic Product (GDP) increases.

Question

Quizplus · Accepted Answer

When the U.S. dollar strengthens, it means that it can buy more foreign currency than before. This makes imported goods cheaper for Americans, leading to an increase in imports. Since net exports are calculated as exports minus imports, an increase in imports (with exports staying constant or not increasing as much) would lead to a decrease in net exports.

If the US Dollar Becomes Stronger in International Foreign Exchange Markets, Imported