Which of the following would not be expected when a country's currency becomes overvalued?
A) Its export goods become too expensive.
B) Its high costs make the country less competitive.
C) Its exchange rate is higher than warranted by its economic conditions.
D) Fewer goods are purchased by other countries.
E) The costs of exported goods declines.

Question

Quizplus · Accepted Answer

When a country's currency becomes overvalued, the costs of exported goods increase because they become too expensive for other countries to purchase. This would result in a decline in the demand for the country's goods, not a decline in the costs of exported goods. Thus, E is the correct answer. A, B, C, and D are all expected consequences of an overvalued currency.

Which of the Following Would Not Be Expected When a Country's