Question : Currency appreciation can negatively impact a country's ________, as it makes the country's exports more expensive.
Option 1: trade balance
Option 2: foreign investment
Option 3: inflation rate
Option 4: unemployment rate
Correct Answer:
trade balance
Solution : The correct answer is (a) trade balance.
Currency appreciation refers to an increase in the value of a country's currency relative to other currencies. When a country's currency appreciates, it makes the country's exports more expensive for foreign buyers. This can lead to a decrease in export competitiveness and potentially result in a decline in export sales. As a result, the trade balance of the country may be negatively affected. If exports decrease and imports increase, it can lead to a trade deficit, where the value of imports exceeds the value of exports. Therefore, currency appreciation can have a negative impact on a country's trade balance.
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