Inflation in France will hurt France's current account as long as exchange rates are flexible.

Question

Quizplus · Accepted Answer

Inflation in France will cause an increase in prices and a decrease in the value of the French currency. This will make imports more expensive and exports less competitive, leading to a deterioration in France's current account. If exchange rates are flexible, the currency value will adjust accordingly, exacerbating the impact of inflation on the current account.

Inflation in France Will Hurt France's Current Account as Long