As the price of foreign exchange decreases relative to the U.S.dollar,the:

A) products made in the U.S.become cheaper for foreigners.
B) goods made in foreign countries become cheaper for Americans.
C) amount of foreign currency required to purchase a unit of U.S.dollar increases.
D) U.S.demand curve for foreign exchange shifts to the right.
E) supply curve of foreign exchange to U.S.markets decreases.

Question

Angelica Culaway · Accepted Answer

Final Answer : B, Explanation :  When the price of foreign exchange decreases relative to the U.S. dollar, it means that the U.S. dollar has strengthened or appreciated against foreign currencies. This makes foreign goods cheaper for Americans, as it now takes fewer dollars to purchase the same foreign currency needed to import the goods. Option A is incorrect because it is the opposite of what happens. Option C is also incorrect - it would occur if the foreign exchange price increased relative to the U.S. dollar instead. Option D is not relevant to the question. Option E is also incorrect since a decrease in the supply of foreign exchange would result in an increase in its price, not a decrease.

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