Question

If other things are held constant, an increase in the United States imports will

A. Tend to cause the dollar to appreciate because the world supply of dollars will rise.

B. Tend to cause the dollar to appreciate because the world demand for dollars will rise.

C. Have no effect on the exchange rate for the dollar because exports will also increase.

D. Tend to cause the dollar to depreciate because the world supply of dollars will rise.

E. Tend to cause the dollar to depreciate because the world demand for dollars will rise

Answer 1

Other things remaining constant, increased US imports will D. Tend to cause the dollar to depreciate because the world supply of dollars will rise.

What is the implication of increased United States imports with other factors constant?

With increased imports by the United States, and if all other factors are held constant, the supply of dollars will increase.

When the supply of dollars increases without a corresponding increase in demand, the dollar will depreciate or lose its value relatively.

Thus, if other things remain constant, increased US imports will D. Tend to cause the dollar to depreciate because the world supply of dollars will rise.

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