ECONOMICS
BALANCE OF TRADE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Net capital outflow will increase.
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Net capital outflow will decrease.
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Demand for it’s currency will increase, resulting in appreciation of it’s currency.
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Demand for it’s currency will decrease, resulting in depreciation of it’s currency.
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Detailed explanation-1: -Increasing demand for a country’s goods and services increases demand for its currency. That, in turn, increases the currency’s value.
Detailed explanation-2: -Tariffs increase the price of goods and services in domestic markets by applying a tax on imported goods that is paid by the domestic importer. To cover the increased costs, the domestic importer then charges higher prices for the goods and services.
Detailed explanation-3: -Higher interest rates can increase a currency’s value. They can attract more overseas investment, which means more money coming into a country and higher demand for the currency.
Detailed explanation-4: -Currency appreciation is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances, and business cycles.
Detailed explanation-5: -If a currency appreciates it is more valuable; if a currency depreciates it is less valuable. When an exchange rate changes, the value of one currency will go up while the value of the other currency will go down. When the value of a currency increases, it is said to have appreciated.