Suppose Brazil faces domestic recession and a current account surplus.Should Brazil revalue its currency,one would expect the:

Question

Quizplus · Accepted Answer

Revaluing the currency would make it stronger and more expensive, thus making exports more expensive for foreign buyers and reducing the current account surplus. This reduction in surplus would further worsen the recession by reducing demand for domestic goods and services. Therefore, the recession would become more severe and the surplus would become less severe.

Suppose Brazil Faces Domestic Recession and a Current Account Surplus