Part 1A strong U.S. dollar means that U.S. goods exported abroad will cost:Part 2
A. more in foreign countries and foreign goods imported will cost more in the United States. B. less in foreign countries and foreign goods imported will cost less in the United States. C. more in foreign countries and foreign goods imported will cost less in the United States. D. less in foreign countries and foreign goods imported will cost more in the United States.

Question

Part 1A strong U.S. dollar means that U.S. goods exported abroad will​ cost:Part 2
A. more in foreign countries and foreign goods imported will cost more in the United States. B. less in foreign countries and foreign goods imported will cost less in the United States. C. more in foreign countries and foreign goods imported will cost less in the United States. D. less in foreign countries and foreign goods imported will cost more in the United States.

BlackTom AI · Accepted Answer

The question asks about the impact of a strong U.S. dollar on the relative cost of U.S. exports and foreign-made imports.
Option A: 'more in foreign countries and foreign goods imported will cost more in the United States.' This is inconsistent with a strong dollar. While U.S. goods become more expensive for foreigners, a stronger dollar makes foreign goods cheaper for U.S. buyers, so imports do not cost more in the United States.
Option B: 'less in foreign countries and foreign goods imported will cost less in the United States.' This gets part of the intuition wrong: a stronger dollar makes U.S. goods more expensive abroad (not less) because foreign buyers need more of their currency to buy the same dollar-priced goods, so exports do not become cheaper for foreign buyers. Additionally, imports would indeed become cheaper for U.S. consumers, not more expensive.
Option C: 'more in foreign countries and foreign goods imported will cost less in the United States.' This aligns with the standard exchange-rate effect: a strong dollar raises the price foreigners pay for U.S. goods (making U.S. exports costlier abroad), while it lowers the price of foreign goods for U.S. buyers (imports cost less in the United States).
Option D: 'less in foreign countries and foreign goods imported will cost more in the United States.' This option flips the direction for both components: foreign countries would not experience lower prices for U.S. goods when the dollar is strong, and U.S. import costs would not rise; in fact, they typically fall. Thus this does not reflect how a stronger dollar operates in international trade.

Homework:Chapter 1 Homework

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