Foreign exchange rate stability is important because a decline in the value of the domestic currency will ________ the inflation rate,and an increase in the value of the domestic currency makes domestic industries ________ competitive with competing foreign industries.
A)increase;more
B)increase;less
C)decrease;more
D)decrease;less

Question

Quizplus · Accepted Answer

A decline in the value of the domestic currency makes imports more expensive, contributing to higher inflation. An increase in the value of the domestic currency makes domestic goods more expensive relative to foreign goods, reducing competitiveness.

Foreign Exchange Rate Stability Is Important Because a Decline in the Value