ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When the value of the U.S. dollar rises in relation to other currencies, exported products become more expensive in those foreign markets and are less competitive. On the other hand, imported products become less expensive in U.S. markets and are more competitive.

Detailed explanation-2: -If monetary policy or fiscal policy impacts the price level, that country’s relative price level is higher relative to other countries, making its goods more expensive. This leads to a decrease in the demand for that currency, and therefore a depreciation of that currency.

Detailed explanation-3: -The correct answer is d) The inflation rate in the United States is low relative to other countries. The low inflation rate in the United States relative to other countries would increase the value of the dollar. The increase in the value of the dollar would increase its demand in the world currency market.

Detailed explanation-4: -If the dollar depreciates (the exchange rate falls), the relative price of domestic goods and services falls while the relative price of foreign goods and services increases. 1. The change in relative prices will increase U.S. exports and decrease its imports.