A stronger US dollar relative to other currencies generally leads to which outcome for US exports?

A stronger US dollar relative to other currencies generally leads to which outcome for US exports?

• A. Increase in exports
• B. Decrease in exports
• C. No change in exports
• D. Exports become more expensive for foreign buyers

Answer: (B)

When the US dollar strengthens, prices of U.S. goods rise in foreign currency terms, making them more expensive for buyers overseas. This reduces foreign demand and lowers the quantity of exports. So the stronger dollar tends to bring down export volumes. It’s true that exports become more expensive for foreign buyers—a mechanism behind the drop in exports—but the outcome being asked is the change in export volumes, which is a decrease.

When the US dollar strengthens, prices of U.S. goods rise in foreign currency terms, making them more expensive for buyers overseas. This reduces foreign demand and lowers the quantity of exports. So the stronger dollar tends to bring down export volumes. It’s true that exports become more expensive for foreign buyers—a mechanism behind the drop in exports—but the outcome being asked is the change in export volumes, which is a decrease.