The currency of Country X is pegged to the currency of Country Y. Assume that Country Y's currency appreciates 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 appreciates against Country Z's currency, it means that it will become cheaper for Country X to import goods from Country Z. This will result in Country X importing more goods from Country Z, leading to an increase in imports.

On the other hand, since Country X's currency is pegged to that of Country Y, Country X's goods will become relatively more expensive than those of Country Y. Thus, it is likely that exports from Country X to Country Z will decrease, leading to a decrease in exports.

Therefore, the correct answer is option D, i.e., less export and more import.

The Currency of Country X Is Pegged to the Currency