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.
Question : Assertion: Fluctuations in foreign exchange rates impact a country's imports and exports.
Reason: Changes in exchange rates affect the relative prices of goods and services, making imports more expensive and exports more competitive.
Question : Assertion: Appreciation of a country's currency can lead to a decrease in its inflation rate.
Reason: A stronger currency reduces the cost of imported goods, thereby lowering inflationary pressures.
Question : A decrease in a country's exports is likely to result in:
Question : Assertion: A depreciating exchange rate benefits a country's tourism industry.
Reason: A weaker domestic currency makes traveling to the country more affordable for foreign tourists.
Question : A country's central bank can intervene in the foreign exchange market to influence the value of its currency. This is known as ________.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile