Which of the following is a true statement?
A) A currency depreciation will be passed along completely as an increase in import prices.
B) A currency depreciation may or may not result in an increase in import prices.
C) A currency depreciation will not be passed along into input prices.
D) A currency depreciation will result in lower import prices.

Question

Quizplus · Accepted Answer

While a currency depreciation can lead to an increase in import prices, it is not guaranteed to do so as it depends on various factors such as the competitiveness of domestic producers, availability of substitutes, and the degree of competition in the importing markets. Therefore, it may or may not result in an increase in import prices. Option A exaggerates the impact of currency depreciation, and option C and D are incorrect.

Which of the Following Is a True Statement