If the average rate of productivity growth in Indian firms is greater than in Australia, then:
A)the Indian rupee will decrease relative to the Australian dollar in the foreign exchange market.
B)the prices of Indian products will increase.
C)the quantity demanded of Indian products will increase relative to Australian products.
D)All of these options are correct.

Question

Quizplus · Accepted Answer

If the productivity growth in Indian firms is greater than in Australia, it would lead to lower production costs in India, making Indian products relatively cheaper compared to Australian products. This would lead to an increase in the quantity demanded of Indian products relative to Australian products. There is no direct correlation between productivity growth and exchange rates or prices of products, so options A and B can be ruled out.

If the Average Rate of Productivity Growth in Indian Firms