Given a two-country world, assume Canada and Sweden devalue their currencies by 20 percent.Other things equal, this would result in
A) an appreciation in the Canadian currency.
B) an appreciation in the Swedish currency.
C) an appreciation in both currencies.
D) an appreciation in neither currency.

Question

Quizplus · Accepted Answer

If both Canada and Sweden devalue their currencies by the same percentage, then there would be no relative change in their exchange rate. Hence, both currencies would not appreciate or depreciate in comparison to each other. Therefore, the answer is D) an appreciation in neither currency.

Given a Two-Country World, Assume Canada and Sweden Devalue Their