ECONOMICS
TRADE EXCHANGE AND INTERDEPENDENCE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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None
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It will have to pay more for those goods
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It will pay less for those goods
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None of the above
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Detailed explanation-1: -Depreciation of your local currency makes the cost of importing goods more expensive, which could lead to a decreased volume of imports. Domestic companies should benefit from this as a result of increased sales, profits and jobs.
Detailed explanation-2: -In general, when a currency loses value, people’s purchasing power declines as well because products-especially imported ones-cost more money. And when that causes a general rise in prices, it’s called inflation.
Detailed explanation-3: -Fall in price of foreign currency (domestic currency appreciation) implies that domestic currency has become more expensive in terms of foreign currency. This reduces the demand for exports.
Detailed explanation-4: -Economic risk, also known as forecast risk, is the risk that a company’s market value is impacted by unavoidable exposure to exchange rate fluctuations.