Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It makes Songland's exports more expensive, reducing demand.
B
It increases demand for Songland's exports due to lower prices.
C
It has no effect on international trade dynamics.
D
It encourages Songland to devalue its currency immediately.
Understanding the Answer
Let's break down why this is correct
Answer
When the Euro increases in value, it means that it takes more Songland dollars to buy the same amount of Euros. This can make goods from Songland more expensive for people in Europe, which may lead to a decrease in exports. For example, if a Songland-made toy costs 10 Songland dollars, and the Euro rises, that toy might now cost more in Euros, making it less attractive for European buyers. As a result, Songland's businesses could sell fewer toys in Europe, which might hurt their profits and the economy. Thus, an appreciation of the Euro can negatively impact Songland's exports by making them less competitive in the European market.
Detailed Explanation
When the Euro gets stronger, it takes more Songland dollars to buy the same goods. Other options are incorrect because Some might think that a stronger Euro means lower prices for Songland's goods; It's a common belief that currency changes don't affect trade.
Key Concepts
Flexible Exchange Rates
International Trade Dynamics
Currency Valuation
Topic
Flexible Exchange Rates
Difficulty
medium level question
Cognitive Level
understand
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