The United Kingdom produces computers and sells them to Mexico. At the same time

Question

The United Kingdom produces computers and sells them to Mexico. At the same time Mexico produces cars and sells them to the United Kingdom. Suppose there is an appreciation in the pound. This will cause: A. A decrease in imports into the United Kingdom and an increase in exports to Mexico, which will cause an increase in aggregate demand and real GDP. B. An increase in imports into the United Kingdom and a decrease in exports to Mexico, which will cause a decrease in aggregate demand and real GDP. C. A decrease in imports into the United Kingdom and a decrease in exports to Mexico, which will cause a decrease in aggregate demand and real GDP. D. An increase in imports into the United Kingdom and an increase in exports to Mexico, which will cause an increase in aggregate demand and real GDP.

Explanation / Answer

B is answer

as the Pound appreciates, its imports will become cheaper while exports costly, so exports should reduce. As the exports reduce that means output will come down , so REAL GDP will plunge

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.