The currency of country X is pegged to the currency of country Y.Assume that county Y's currency depreciates against the currency of country Z.It is likely that country X will export _______ to country Z and import _______ from country Z.

Question

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If country Y's currency depreciates against country Z's currency, country X's currency, being pegged to country Y's, will also effectively depreciate against country Z's currency. This makes exports from country X to country Z cheaper and imports from country Z to country X more expensive, leading to more exports and fewer imports.

The Currency of Country X Is Pegged to the Currency