When citizens anticipate a country to experience trade deficits in the near future,the domestic currency would:
A) Appreciate immediately
B) Appreciate only in the future
C) Depreciate immediately
D) Depreciate only in the future

Question

Quizplus · Accepted Answer

When citizens anticipate a country to experience trade deficits in the near future, they may become hesitant to hold onto the domestic currency, as they believe that the increased imports and decreased exports will lead to a decrease in demand for the currency. This can lead to a higher supply of the domestic currency on the foreign exchange market, resulting in a decrease in its value, or depreciation. Therefore, the domestic currency would depreciate immediately.

When Citizens Anticipate a Country to Experience Trade Deficits in the near Future,the