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Assume that the US dollar appreciates relative to the British pound. Everything else being equal, this...

A. reduces both American exports to the UK and American imports from the UK.
B. increases both American exports to the UK and American imports from the UK.
C. reduces American exports to the UK but increases American imports from the UK.
D. increases American exports to the UK but reduces American imports from the UK.

Answer :

Final answer:

The correct answer is option c. When the US dollar appreciates relative to the British pound, it reduces American exports to the UK but increases American imports from the UK.

Explanation:

When the US dollar appreciates relative to the British pound, it means that the value of the US dollar increases compared to the British pound. This makes American goods more expensive for British consumers, as they need to exchange more pounds to purchase the same amount of US dollars. As a result, the demand for American goods in the UK decreases, leading to a reduction in American exports to the UK.

On the other hand, the appreciation of the US dollar makes British goods relatively cheaper for American consumers. American importers can purchase more British goods with the same amount of US dollars. This leads to an increase in American imports from the UK.

Therefore, the correct answer is option c. The appreciation of the US dollar reduces American exports to the UK but increases American imports from the UK.

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