In some developing countries, different exchange rates apply to different categories of transaction, and therefore _____
A) the local currency is not easily convertible to foreign currency.
B) the local currency is very easily convertible to foreign currency.
C) the prices of foreign goods fluctuate widely in domestic markets.
D) the prices of domestic goods fluctuate widely in foreign markets.
E) domestic investors are more inclined to invest in foreign assets.

Question

Quizplus · Accepted Answer

When different exchange rates apply to different categories of transaction, it becomes difficult to convert the local currency to foreign currency. This can create difficulties for international trade and investment, and may lead to currency devaluation and instability in the economy.

In Some Developing Countries, Different Exchange Rates Apply to Different