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If the price levels in the United States and in France are unchanged, but the nominal exchange rate (euro per U.S. dollar) falls, then the U.S. dollar
A) depreciates and so U.S.net exports falls.
B) depreciates and so U.S.net exports rises.
C) appreciates and so U.S.net exports falls.
D) appreciates and so U.S.net exports rises.
Price Levels
A mean calculation of prices for all goods and services currently in the economic domain.
Nominal Exchange Rate
The rate at which the currency of one country can be exchanged for the currency of another country, not adjusted for inflation.
Net Exports
The value of a country's total exports minus its total imports, representing the net amount of a nation's goods and services traded with the rest of the world.
- Comprehend the principles of nominal and real exchange rates.
- Understand the influence of exchange rates on global trade and the pricing of products.
- Assess the implications of exchange rate movements on a country's net exports.
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Learning Objectives
- Comprehend the principles of nominal and real exchange rates.
- Understand the influence of exchange rates on global trade and the pricing of products.
- Assess the implications of exchange rate movements on a country's net exports.
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