Question

Other things being equal, an appreciation of the domestic currency:


lowers the domestic price of imported goods.


raises the domestic price of imported goods.


lowers the world price of imported goods.


lowers the value of our currency in a foreign country.

Answer 1

An appreciation of the domestic currency generally:

**lowers the domestic price of imported goods.**

When the domestic currency appreciates, it becomes stronger relative to foreign currencies, meaning that it takes fewer units of the domestic currency to purchase the same amount of foreign goods. As a result, imported goods become cheaper for consumers in the domestic market.