The strengthening in the U.S. dollar in comparison to other currencies would have the effect of making which of the following true?

The strengthening in the U.S. dollar in comparison to other currencies would have the effect of making which of the following true?

• A. U.S. exports less competitive than domestic goods only, no effect on Foreign imports.
• B. Foreign imports more competitive than U.S. goods & U.S. exports less competitive than domestic goods.
• C. U.S. exports more competitive than domestic goods only, no effect on Foreign imports
• D. Foreign imports less competitive than U.S. goods & U.S. exports more competitive than domestic goods.

Answer: (B)

An appreciation of the dollar makes U.S. goods more expensive for buyers in other currencies and makes foreign goods cheaper for U.S. buyers. This pushes U.S. exports toward being less competitive abroad, while foreign imports become more competitive in the U.S. market. The statement that foreign imports are more competitive than U.S. goods and that U.S. exports are less competitive than domestic goods captures these effects, which is why it is the best answer.

An appreciation of the dollar makes U.S. goods more expensive for buyers in other currencies and makes foreign goods cheaper for U.S. buyers. This pushes U.S. exports toward being less competitive abroad, while foreign imports become more competitive in the U.S. market. The statement that foreign imports are more competitive than U.S. goods and that U.S. exports are less competitive than domestic goods captures these effects, which is why it is the best answer.