Real exchange rate affects exports and imports, International Economics

Assignment Help:

Q. Explain how an increase in the real exchange rate affects exports and imports.

Answer: While the real exchange rate rises domestic products are cheaper relative to Foreign products. Because of this exports enhancing as foreigners demand more domestic exports. The revolutionize in imports is ambiguous for the reason that fewer units of imports are purchased the volume effect however each foreign unit is now more expensive the value effect. Keep in mind that exports and imports are measured in terms of domestic output that is dollar value not volume of units. Though we habitually assume that the volume effect outweighs the value effect thus that imports decrease when the real exchange rate rises.


Related Discussions:- Real exchange rate affects exports and imports

Example of zero-tariff free trade policies, Q. Presumably, since the Unite...

Q. Presumably, since the United States is a large country in many of its international markets, a positive optimum tariff exists for this country. It follows thus that when any l

Assignment, Road,railway,air and shlping transportation

Road,railway,air and shlping transportation

ECONOMICS, In the Ricardian analysis, why does each trading partner have an...

In the Ricardian analysis, why does each trading partner have an incentive to produce at an endpoint of its production-possibility frontier? Why are prices of factors of production

British economy, how is it the economy during the two wars and till 20 th

how is it the economy during the two wars and till 20 th

Why is the u.s. dollar considered a vehicle currency, Q. Explain what a "v...

Q. Explain what a "vehicle currency" is. Why is the U.S. dollar considered a vehicle currency? Answer: A vehicle currency is one specifically widely used to denominate inter

International trade, INTERNATIONAL TRADE can be understood as follows B...

INTERNATIONAL TRADE can be understood as follows By the international trade, we signify the exchange of goods and services between different countries. For any individual count

Calculate the effects of the fall in the relative price, Q. Calculate the ...

Q. Calculate the effects of the fall in the relative price of good 2 on the income of the specific factors capital and land. Answer: For the reason that good 2 uses land, a f

Explain how the aa schedule is derived, Q. Explain how the AA schedule is d...

Q. Explain how the AA schedule is derived. Answer: For a fixed real money supply an enhancement in output leads to an increase in the domestic interest rate. In the foreign e

Opportunity cost, Write notes on opportunity cost by Haber lal

Write notes on opportunity cost by Haber lal

U.s. government offers subsidy, Q. Suppose the U.S. government (but not Eu...

Q. Suppose the U.S. government (but not Europe) offers a $10 million subsidy? Answer: In this case Airbus would make a decision not to enter the market since it knows Boeing

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd