If people thought that many banks in a certain country were at or near the point of bankruptcy, then that country's real exchange rate
A)and net exports would rise.
B)would rise and its net exports would fall.
C)would fall and its net exports would rise.
D)and its net exports would fall.

Question

Quizplus · Accepted Answer

If people believed many banks in a certain country were near bankruptcy, it would likely lead to a loss of confidence in that country's currency, causing its value to decrease (real exchange rate to fall). A weaker currency makes the country's goods cheaper for foreigners, potentially increasing net exports.

If People Thought That Many Banks in a Certain Country