Practice Quiz

CLEP Principles of Macroeconomics Exam Prep

Category - Macroeconomics

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If the dollar appreciates relative to the Philippine peso, then which of the following is true?
  1. Goods from the United States sold in the Philippines would become cheaper
  2. There would be no change in the price of United States goods sold in the Philippines
  3. Goods from the Philippines sold in the United States would become more expensive
  4. Goods from the United States sold in the Philippines would become more expensive
Explanation
Answer - D - If the dollar appreciates relative to the Philippine peso, then goods from the United States sold in the Philippines would become more expensive.

Key Takeaway: In order for the Philippines to buy goods made in the United States, the Philippines needs U.S. dollars. So if the dollar appreciates (raises in value) against the Philippines peso, the same number of pesos would buy fewer U.S. dollars. Therefore, the Philippines would need more pesos to purchase the same amount of goods from the United States, making exports to the Philippines more expensive.
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