Which of the following compete to determine whether the current account improves or worsens following a rise in the real exchange rate?
A) appreciation and depreciation
B) crowding out effect and producers effect
C) volume effect and value effect
D) volume effect and inflation
E) producers effect and value effect

Question

Quizplus · Accepted Answer

The volume effect and value effect compete to determine whether the current account improves or worsens following a rise in the real exchange rate. The volume effect relates to changes in the volume of exports and imports due to the change in relative prices, while the value effect relates to changes in the value of exports and imports due to changes in the exchange rate. The other options are not relevant to this particular scenario.

Which of the Following Compete to Determine Whether the Current