The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency depreciates against the currency of Country Z. It is likely that Country X will export ____ to Country Z and import ____ from Country Z.

Question

Quizplus · Accepted Answer

If Country Y's currency depreciates against Country Z, Country X's currency, being pegged to Country Y, will also effectively depreciate against Country Z. This makes Country X's exports cheaper and imports more expensive relative to Country Z, leading to more exports and fewer imports.

The Currency of Country X Is Pegged to the Currency