If relative trade barriers go up and relative productivity goes up, the domestic currency
A) appreciates.
B) depreciates.
C) stays the same.
D) none of the above.

Question

Quizplus · Accepted Answer

When relative trade barriers increase, it tends to make imports more expensive and can reduce the trade deficit or increase the trade surplus, which can lead to an appreciation of the domestic currency. Similarly, an increase in relative productivity makes a country's goods and services more competitive internationally, potentially increasing exports and reducing imports, which also supports currency appreciation.

If Relative Trade Barriers Go Up and Relative Productivity Goes