Other things being equal,an appreciation of the domestic currency tends to

Question

Quizplus · Accepted Answer

An appreciation of the domestic currency makes foreign goods cheaper for domestic consumers, thus encouraging imports. It does not encourage exports, as domestic goods become more expensive for foreign buyers. It also does not necessarily have a positive effect on the trade account, as it can lead to a trade deficit by increasing imports and decreasing exports.

Other Things Being Equal,an Appreciation of the Domestic Currency Tends