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From course:

Economics A Level (DONEEEEEEE)

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Question:

How can the Exchange Rate affect Exports and Imports?

Author: eric_galvao



Answer:

-Long Run will see Imports more Cheaper and Exports more Expensive if the Value of Currency Rises. This makes Demand for Imports Up, and Exports down. Stronger Currency therefore will Favour Imports [Opposite is True] -Short Run will see that Imports and Exports Demand are Price Inelastic. Some goods won’t have Substitutes while others will, but there’s Time Lag before Nations Switch. So a Stronger Currency [Short Term] will Improve Net Exports [As its worth More] [Because they can’t switch on time]


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