1 answer

QUESTION 2 Select all of the following that are true regarding a fx transaction, ceteris paribus: O As a currency

Question:

QUESTION 2 Select all of the following that are true regarding a fx transaction, ceteris paribus: O As a currency appreciates
QUESTION 2 Select all of the following that are true regarding a fx transaction, ceteris paribus: O As a currency appreciates, exports are reduced An modest increase in a country's inflation rate will appreciate its currency A reduction in long term fiscal policy investment in a country will appreciate the currency As a currency appreciates, inflation due to imports is reduced A modestly more contractionary monetary policy will appreciate a country's currency

Answers

1. True because by appreciation in currency the domestic products are expensive for foreign currency.

2. False because inflation leads to low purchasing power as things are became more expensive which leads to depreciation of the currency.

3.false because it also reduces the growth of the economy which leads to depreciation of the currency.

4. True because by appreciation of the currency the foreign commodity becomes cheap which reduces any inflation due to excess import.

5. True because it induces higher interest rate which leads to more demand for domestic currency , result the appreciation of the currency.

.

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