Economics Semester Exam

Question

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Question
The United Kingdom currently has a trade deficit with New Zealand. If the U.K. pound sterling appreciates relative to the New Zealand dollar, which of the following correctly explains the effect on the U.K.'s demand for goods from New Zealand?(1 point)
Responses

The U.K.'s demand for New Zealand goods will decline.
The U.K.'s demand for New Zealand goods will decline.

The U.K.'s demand for New Zealand goods can't be determined.
The U.K.'s demand for New Zealand goods can't be determined.

The U.K.'s demand will remain the same.
The U.K.'s demand will remain the same.

The U.K.'s demand for New Zealand goods will rise.

Answer 1

If the U.K. pound sterling appreciates relative to the New Zealand dollar, it means that British consumers will find New Zealand goods cheaper because they can get more New Zealand dollars for each pound. Therefore, the U.K.'s demand for New Zealand goods will increase.

The correct response is:

The U.K.'s demand for New Zealand goods will rise.