Question at position 6 An increase in the international value of the United States dollar will tend to cause 4MA64employment in the manufacturing sector of the United States to increase the national income of the United States to increasethe inflation rate in the United States to increase the growth rate of the United States economy to increase United States exports to fall

Question

Question at position 6 An increase in the international value of the United States dollar will tend to cause 4MA64employment in the manufacturing sector of the United States to increase the national income of the United States to increasethe inflation rate in the United States to increase the growth rate of the United States economy to increase United States exports to fall

BlackTom AI · Accepted Answer

A stronger (appreciating) U.S. dollar raises the dollar price of foreign currencies, so U.S. goods become more expensive to foreign buyers while foreign goods become cheaper for U.S. consumers. This change in relative prices is the key concept: exchange-rate appreciation reduces export competitiveness and tends to increase imports.

Relevant concepts:
- Exchange-rate appreciation: one unit of foreign currency now buys fewer dollars; conversely, one dollar buys more foreign currency.
- Price competitiveness and demand: export demand depends on foreign-currency price of U.S. goods.
- Aggregate demand effect: net exports = exports − imports; a fall in net exports lowers GDP and can affect employment and inflation.

Step-by-step reasoning:
1. Let P_US be the dollar price of a U.S. good and E the dollar/foreign exchange rate (dollars per unit of foreign currency). The foreign-currency price paid by foreigners is P_US × E. If the dollar appreciates, E falls (fewer dollars per foreign currency) or equivalently one dollar buys more foreign currency; foreigners face a higher effective price in their own currency. For example, if the dollar appreciates 10%, a U.S. product that cost $100 now costs a foreign buyer 10% more in their currency.
2. Higher foreign-currency prices reduce foreign demand for U.S. exports (quantity demanded falls, depending on price elasticity).
3. Simultaneously, U.S. consumers find imported goods cheaper in dollar terms, increasing imports.
4. The combined effect is a decline in U.S. exports and likely net exports, reducing production in export sectors.

Why the correct choice is correct:
- “United States exports to fall” directly follows from reduced price competitiveness of U.S. goods abroad when the dollar appreciates.

Why the other options are incorrect:
- Employment in manufacturing to increase: wrong — export-sensitive manufacturing typically loses sales and employment when exports fall.
- National income to increase: wrong — lower net exports reduce GDP/national income, all else equal.
- Inflation rate to increase: wrong — cheaper imports exert downward pressure on domestic price levels, tending to reduce inflation.
- Growth rate to increase: wrong — reduced net exports lower aggregate demand and can slow growth.

Final confirmation: the correct answer is “United States exports to fall,” which matches the provided answer.

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