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

Question

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 means that the currency has increased in value relative to other currencies. This typically leads to the following implication:

• Lowers the domestic price of imported goods.

When the domestic currency appreciates, 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.

Therefore, the correct statement is that an appreciation of the domestic currency lowers the domestic price of imported goods.