If a country experiences low inflation relative to the United States, its exports to the United States should ____, and there is ____ pressure on its currency's equilibrium value.
A) decrease; downward
B) decrease; upward
C) increase; downward
D) increase; upward

Question

If a country experiences low inflation relative to the United States, its exports to the United States should ____, and there is ____ pressure on its currency's equilibrium value.​
A) ​decrease; downward
B) ​decrease; upward
C) ​increase; downward
D) ​increase; upward

Quizplus · Accepted Answer

When a country experiences low inflation relative to the United States, its goods become relatively cheaper, leading to an increase in exports to the United States. This increased demand for its goods (and thus its currency) puts upward pressure on its currency's equilibrium value.

If a Country Experiences Low Inflation Relative to the United