What is the likely result from a depreciation of a nation's currency when its economy is operating at its full-employment level of output?
A)net exports fall and contribute to demand-pull inflation
B)net exports rise and contribute to demand-pull inflation
C)net exports fall, but equilibrium GDP rises
D)net exports rise, but equilibrium GDP falls

Question

Quizplus · Accepted Answer

When a nation's currency depreciates, its goods become cheaper for foreign buyers, leading to an increase in net exports. At full employment, this increase in demand can lead to demand-pull inflation.

What Is the Likely Result from a Depreciation of a Nation's