AP Macroeconomics Question 347: Answer and Explanation
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6. Which of the following is a likely effect of a higher tariff imposed by the United States on imported automobiles?
- A. Net exports will fall and the dollar will appreciate in value.
- B. Net exports will fall and the dollar will depreciate in value.
- C. The price of automobiles in the United States will fall.
- D. Net exports will rise and the dollar will depreciate in value.
- E. Net exports will rise and the dollar will appreciate in value.
Correct Answer: E
E-A tariff causes imports to fall, so net exports rise for the U.S. With fewer consumers demanding foreign-built cars, the demand for foreign currency falls, decreasing the value of foreign currency, appreciating the value of the U.S. dollar.