Question

If the real exchange were to rise, what would likely happen to exports and imports? Why does this occur?

Answer 1

=> ANSWER ::

-> If Real Exchange Rate Of country Rise, It Means Its Currency Value Increase So it Makes The Domestic Currency Strong Against The Foreign Currency So It Increase Countries Import and Decrease Its Export Because Currency Is Appreciate Because Of Exchange Rate Rise.

->     If Exchange Rate Rise it Means Domestic Currency Value Appreciate So By Domestic Currency People can Buy More Foreign Goods and Services Because Increase Currency Value Make Them Cheaper For Country So Domestic Countries Import Increase From Foreign Countries. At The Other Hand Domestic Countries Goods and Services Prices Higher For Foreign Countries So It Decrease The Export Of Domestic Country Because Of Exchange Rate Rise.

-> So We Assume That Rise In Exchange Rate Decrease The Export and Increase The Import That Is called Currency Appreciation And Fall In Exchange rate Increase Countries Export And Decrease Ita Import That Is Called Currency Depreciation.