Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
By making exports cheaper and imports more expensive, thereby improving the trade balance.
B
By reducing the overall level of trade and investment between countries.
C
By eliminating the need for economic policy adjustments entirely.
D
By favoring only the importation of goods and services.
Understanding the Answer
Let's break down why this is correct
Answer
Exchange rate adjustments can significantly affect the balance of trade, which is the difference between a country's exports and imports. When a country's currency weakens, it makes its goods cheaper for foreign buyers, potentially increasing exports. For example, if the U. S. dollar weakens against the euro, European consumers may buy more American products because they are less expensive in their currency.
Detailed Explanation
When a country's currency gets weaker, its goods become cheaper for other countries. Other options are incorrect because Some might think that changing exchange rates stops trade; It's a common mistake to think that exchange rates solve all problems.
Key Concepts
exchange rate adjustments
economic policy adjustments
balance of trade
Topic
Balance of Payments Adjustments
Difficulty
hard level question
Cognitive Level
understand
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