A real depreciation of a nation's currency gives rise to the ________ effect and the ________ effect on the current account.
A) volume; value
B) depletion; expansion
C) surplus; deficit
D) output; trade
E) price; profit

Question

Quizplus · Accepted Answer

The real depreciation of a nation's currency typically leads to the volume effect, where the quantity of exports increases due to their lower price in foreign markets, and the value effect, where the value of the currency changes relative to other currencies, affecting the price competitiveness of exports and imports.

A Real Depreciation of a Nation's Currency Gives Rise to the ________