If a country decreases the external value of its currency, it will affect:

Related MCQs

• Country A has 100 units of labor and Country B has 200 units of labor. Both countries produce computers and Web pages. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 Assume free trade exists and that the relative price is such that both countries specialize completely in the industry in which they have a comparative advantage (neither country produces both goods). The supply of computers relative to Web pages will be:
• Country A and Country B produce computers and Web sites. The unit labor requirements are given in the table below: Computers Web pages Country A 50 1 Country B 100 1 At which of the following relative prices (computers in terms of Web sites) will Country B produce both goods under free trade?
• To prevent the external value of its currency rising the government could:
• Assume that Country A is relatively abundant in labor and Country B is relatively abundant in land. Note that wages are the returns to labor and rents are the returns to land. According to the factor price equalization theorem, once Country A begins specializing according to comparative advantage and trading with Country B.
• A fall in the external value of a currency:
• Under a fixed exchange rate system, ____________________are official changes in the value of a country's currency relative to other currencies.
• Which of the following is NOT an argument for a country allowing its currency to float freely?
• If interest rate parity holds, then the one-year forward rate of a currency will ______ the predicted spot rate of the currency in one year according to the international Fisher effect.
• Assume a two-country world: Country A and Country B. Which of the following is correct about purchasing power parity (PPP) as related to these two countries?
• __________ is the deliberate downward adjustment in the official exchange rate, reduces the currency's value.