Ceteris paribus,if incomes increase faster in the United States than in less developed countries,then the currencies of less developed countries should

Question

Quizplus · Accepted Answer

If incomes increase faster in the United States than in less developed countries, there will be greater demand for goods and services in the US, leading to an increase in demand for the US dollar. As a result, the dollar should appreciate. On the other hand, as incomes in less developed countries do not increase as rapidly, there may be less demand for their currencies, leading to a decrease in demand and a depreciation of their currencies. Therefore, the currencies of less developed countries should appreciate, and the dollar should depreciate. Thus, B is the correct answer.

Ceteris Paribus,if Incomes Increase Faster in the United States Than