📚 Learning Guide
Impact of Currency Appreciation
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Currency appreciation is to decreased net exports as increased tariffs are to what?

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Choose the Best Answer

A

Decreased import prices

B

Increased domestic production

C

Lower exchange rates

D

Increased foreign investment

Understanding the Answer

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Answer

Currency appreciation means that a country's money is worth more compared to other currencies. When this happens, its goods become more expensive for other countries to buy, which can lead to decreased net exports. In a similar way, increased tariffs, which are taxes on imported goods, make foreign products more expensive for consumers. This can lead to increased demand for local goods instead of imported ones. For example, if a country raises tariffs on imported cars, people might buy more cars made in their own country, boosting local production.

Detailed Explanation

When tariffs are raised, it makes foreign goods more expensive. Other options are incorrect because Some might think tariffs lower prices on imports; People might believe tariffs affect exchange rates directly.

Key Concepts

Currency appreciation
Impact on trade dynamics
Tariffs and trade policy
Topic

Impact of Currency Appreciation

Difficulty

medium level question

Cognitive Level

understand

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