BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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exports becomes more expensive
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exports becomes more cheap
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imports becomes more expensive
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surplus balance of payment
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Detailed explanation-1: -Higher inflation can also impact exports by having a direct impact on input costs such as materials and labor. These higher costs can have a substantial impact on the competitiveness of exports in the international trade environment.
Detailed explanation-2: -Inflation leads to costlier goods and services in the international market. Export of goods and services will increase only if demand for domestic export in foreign countries is inelastic (Fleming, 1962; Mundell, 1963).
Detailed explanation-3: -If a country exports more than it imports, there is a high demand for its goods, and thus, for its currency. The economics of supply and demand dictate that when demand is high, prices rise and the currency appreciates in value.
Detailed explanation-4: -The inflation and volume of export are determined through exchange rate. If a country is facing high inflation, it means that all goods and service are costlier in the international market, so domestic goods and services are less in demand in the international market.