An increase in the value of the US dollar relative to currencies of other countries should result in which of the following?

An increase in the value of the US dollar relative to currencies of other countries should result in which of the following?

• A. Increased quantity of exports from the US
• B. Decreased quantity of exports from the US
• C. No change in exports
• D. Exports become more expensive for US buyers

Answer: (B)

A stronger dollar makes US-made goods costlier in other countries. When the dollar is high relative to foreign currencies, foreigners need more of their own money to buy the same US products, so demand for US exports falls. That drop in foreign demand leads to a smaller quantity of exports. In contrast, imports into the US become cheaper because a strong dollar buys more foreign currency, so the effect is not on US buyers’ export prices.

A stronger dollar makes US-made goods costlier in other countries. When the dollar is high relative to foreign currencies, foreigners need more of their own money to buy the same US products, so demand for US exports falls. That drop in foreign demand leads to a smaller quantity of exports. In contrast, imports into the US become cheaper because a strong dollar buys more foreign currency, so the effect is not on US buyers’ export prices.