Suppose residents of the U.S. consume relatively more of U.S. export goods than residents of foreign countries.

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Suppose residents of the U.S. 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)?
Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
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International Finance Theory and Policy

ISBN: 978-0133423648

10th edition

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

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