18. Suppose residents of the United States consume relatively more of U.S. export goods than residents of

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18. Suppose residents of the United States consume relatively more of U.S. export goods than residents of foreign countries. In other words, U.S. export goods have a higher weight in the U.S. CPI than they do in other countries. Conversely, foreign exports have a lower weight in the U.S. CPI than they do abroad. What would be the effect on the dollar’s real exchange rate of a rise in the U.S. terms of trade (the relative price of U.S. exports in terms of U.S. imports)?

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International Finance Theory And Policy

ISBN: 9781292238739

11th Global Edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz

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