B. Domestic goods become less competitive internationally

Here's why:

1. The real exchange rate is the purchasing power of a currency relative to another at current exchange rates and prices. It is a measure of a currency's value compared to another currency.

2. When a country's real exchange rate increases, it means that its currency has appreciated in value relative to other currencies.

3. This appreciation makes the country's goods more expensive for foreign buyers. This is because foreign buyers now need more of their own currency to buy the same amount of goods from the country with the appreciated currency.

4. As a result, the demand for the country's goods decreases in the international market, making them less competitive.

5. On the other hand, foreign goods become cheaper for consumers in the country with the appreciated currency, which could increase imports and further decrease the competitiveness of domestic goods.

So, an increase in a country's real exchange rate generally makes domestic goods less competitive internationally.

Question

B. Domestic goods become less competitive internationally

Here's why:

1. The real exchange rate is the purchasing power of a currency relative to another at current exchange rates and prices. It is a measure of a currency's value compared to another currency.

2. When a country's real exchange rate increases, it means that its currency has appreciated in value relative to other currencies.

3. This appreciation makes the country's goods more expensive for foreign buyers. This is because foreign buyers now need more of their own currency to buy the same amount of goods from the country with the appreciated currency.

4. As a result, the demand for the country's goods decreases in the international market, making them less competitive.

5. On the other hand, foreign goods become cheaper for consumers in the country with the appreciated currency, which could increase imports and further decrease the competitiveness of domestic goods.

So, an increase in a country's real exchange rate generally makes domestic goods less competitive internationally.

Knowee AI · Accepted Answer

B. Domestic goods become less competitive internationally

Here's why:

1. The real exchange rate is the purchasing power of a currency relative to another at current exchange rates and prices. It is a measure of a currency's value compared to another currency.

2. When a country's real exchange rate increases, it means that its currency has appreciated in value relative to other currencies.

3. This appreciation makes the country's goods more expensive for foreign buyers. This is because foreign buyers now need more of their own currency to buy the same amount of goods from the country with the appreciated currency.

4. As a result, the demand for the country's goods decreases in the international market, making them less competitive.

5. On the other hand, foreign goods become cheaper for consumers in the country with the appreciated currency, which could increase imports and further decrease the competitiveness of domestic goods.

So, an increase in a country's real exchange rate generally makes domestic goods less competitive internationally.

How does a significant increase in a country's real exchange rate affect the competitiveness of domestic goods internationally?A.Domestic goods become more competitive internationallyB.Domestic goods become less competitive internationallyC.Unemployment rate decreases substantially

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