Suppose There Is a Decrease in the Real Exchange Rate

question 11

Multiple Choice

Suppose there is a decrease in the real exchange rate. Which of the following will occur as a result of this change in the real exchange rate?

• A) An increase in net exports.
• B) A decrease in exports.
• C) A decrease in government spending.
• D) A decrease in output.
• E) An increase in imports.

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Definitions:

Economic Profits

The surplus remaining after total costs are subtracted from total revenue, taking into account both explicit and implicit costs.

Industry Supply

The total output of goods or services that firms in a specific industry are willing and able to sell at various price levels.

Decreasing-cost Industry

An industry where average costs of production decrease as the scale of output increases.

Long-run Equilibrium Price

The price at which the quantity of a good demanded equals the quantity supplied, with all adjustments made for factors affecting supply or demand over time.