Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It improves the trade balance by making exports cheaper.
B
It worsens the trade balance by making imports cheaper.
C
It has no effect on the trade balance.
D
It improves the trade balance by increasing foreign investment.
Understanding the Answer
Let's break down why this is correct
Answer
When a country's currency appreciates, it means that its money is worth more compared to other currencies. This makes goods and services from that country more expensive for people in other countries, which can lead to a decrease in exports. For example, if a toy from the United States costs $10, and the U. S. dollar becomes stronger, that toy might now cost more in euros for a buyer in Europe.
Detailed Explanation
When a country's currency gets stronger, it means that foreign goods become cheaper to buy. Other options are incorrect because Some might think that a stronger currency makes exports cheaper; It's a common mistake to believe that currency changes don't matter.
Key Concepts
exchange rates
international trade balance
Topic
Impact of Currency Appreciation
Difficulty
medium level question
Cognitive Level
understand
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