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

Intra industry trade, what is the diffrent between inter-industry trade and...

what is the diffrent between inter-industry trade and intra industry

What is a convertible currency, Q. What explains the nearly universal scope...

Q. What explains the nearly universal scope of the Great Depression? Answer: The international gold typical played a central role in starting deepening and spreading the Great

Write about masculinity vs. feminity of culture, 1. Write about masculinity...

1. Write about masculinity vs. feminity of culture. 2. Write a note on ‘Organic effect' that affect the decision making process. 3. What is ‘Ad Valoram' rate of duty? 4. What is ‘D

Economic growth, roles of international trade in economic growth of the cou...

roles of international trade in economic growth of the country

Evaluate the argentinean convertibility law, Q. Evaluate the Argentin...

Q. Evaluate the Argentinean Convertibility Law of April, 1991. Answer: Excellent idea in the short run disastrous idea in the long run. The law was discarded only in Ja

Real exchange rate affects exports and imports, Q. Explain how an i...

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

Internal goals of full employment and price stability, Q. How did the inter...

Q. How did the international monetary system created at Bretton Woods in 1944 allow its members to reconcile their external commitments with their internal goals of full employment

Example of economic dualism, Q. It has been argued that economic dualism t...

Q. It has been argued that economic dualism that typifies relatively less developed or poor countries, is a barrier to participation in the global village, and lessens the chances

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