Suppose, due to political instability, Russians suddenly choose to purchase UK assets as opposed to Russian assets. Which of the following statements is true regarding the value of the pound and UK net exports? The pound:
A) Appreciates, and UK net exports rise.
B) Appreciates, and UK net exports fall.
C) Depreciates, and UK net exports rise.
D) Depreciates, and UK net exports fall.

Question

Quizplus · Accepted Answer

When Russians purchase UK assets, demand for the pound increases, causing it to appreciate. An appreciated pound makes UK goods more expensive for foreign buyers, leading to a decrease in UK net exports.

Suppose, Due to Political Instability, Russians Suddenly Choose to Purchase