2. Introduction to the foreign-currency In an open economy, why is the demand curve for dollars in the foreign-currency exchange market downward sloping? O A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall. A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange. O When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers. ONet capital outflow equals net exports.
2. Introduction to the foreign-currency In an open economy, why is the demand curve for dollars in the foreign-currency exchange market downward sloping? O A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall. A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange. O When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic goods more attractive to domestic and foreign consumers. ONet capital outflow equals net exports.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: A Macroeconomic Theory Of The Open Economy
Section: Chapter Questions
Problem 5PA
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Introduction to the foreign-currency exchange market
Transcribed Image Text:2. Introduction to the foreign-currency exchange market
In an open economy, why is the demand curve for dollars in the foreign-currency exchange market downward sloping?
O A depreciation in the domestic currency causes exports to fall and imports to rise and, therefore, net exports to fall.
O A depreciation of the dollar reduces the quantity of dollars demanded in the market for foreign-currency exchange.
O When the value of the domestic currency depreciates, domestic goods become less expensive relative to foreign goods, making domestic
goods more attractive to domestic and foreign consumers.
O Net capital outflow equals net exports.
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