The country of Meditor is politically very stable and has a long tradition of respecting property rights.If several other countries suddenly became politically unstable,we would expect Meditor's
A)real interest rate to rise.
B)real exchange rate to fall.
C)net exports to fall.
D)None of the above is likely.

Question

Quizplus · Accepted Answer

If several other countries become politically unstable, it would not affect Meditor's political stability and respect for property rights. However, it is likely to have an impact on the economies of those countries, leading to a decrease in their economic activity and hence, reducing their demand for imports from Meditor, resulting in a fall in net exports. This fall in net exports would, in turn, reduce demand for Meditor's currency, leading to a depreciation in its real exchange rate.

The Country of Meditor Is Politically Very Stable and Has