Depreciation in the US RER leads to...

US goods have become cheaper relative to foreign goods-->both domestic and foreign consumers buy more US goods and less foreign goods-->US exports rise and imports fall-->US net exports rise.

NER * (Domestic Price/Foreign Price)

Law of One Price (LOOP)

A good must sell for the same price in all locations.

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Open Economy Macro 1

Part Duo

Question	Answer
Depreciation in the US RER leads to...	US goods have become cheaper relative to foreign goods-->both domestic and foreign consumers buy more US goods and less foreign goods-->US exports rise and imports fall-->US net exports rise.
RER=	NER * (Domestic Price/Foreign Price)
Law of One Price (LOOP)	A good must sell for the same price in all locations.