An increase in the prices of ________ goods is unlikely to put downward pressure on a currency's nominal exchange rate.

Question

Quizplus · Accepted Answer

Nontradable goods are those that cannot be easily imported or exported, such as services in the domestic market. An increase in the prices of nontradable goods is unlikely to affect the demand for the currency, as there is no easy substitute for these goods from foreign markets. Therefore, there is no downward pressure on the currency's nominal exchange rate.

An Increase in the Prices of ________ Goods Is Unlikely