The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency depreciates against the currency of Country Z. It is likely that Country X will export ____ to Country Z and import ____ from Country Z.

Question

​The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency depreciates against the currency of Country Z. It is likely that Country X will export ____ to Country Z and import ____ from Country Z.

Quizplus · Accepted Answer

When Country X's currency is pegged to Country Y's currency, and Country Y's currency depreciates against Country Z, Country X's currency also effectively depreciates against Country Z. This makes Country X's goods cheaper for Country Z, likely increasing exports to Country Z. Conversely, Country Z's goods become more expensive for Country X, likely decreasing imports from Country Z.

​The Currency of Country X Is Pegged to the Currency

The Currency of Country X Is Pegged to the Currency