Assume that Country X and Country Y are trading partners and the exchange rates are fixed.If prices in Country Y fall, which of the following is expected to happen?
A)Country X will export more.
B)Economy of Country X will be depressed.
C)Net exports will rise for Country X.
D)Country Y will import more.

Question

Quizplus · Accepted Answer

If prices in Country Y fall, goods from Country Y become cheaper relative to those from Country X. This can lead to a decrease in demand for Country X's exports, potentially depressing its economy.

Assume That Country X and Country Y Are Trading Partners