Assume a nation's external wealth is negative. Also assume all liabilities and assets are denominated in a foreign currency. How will its wealth change when its currency appreciates in world markets?

Question

Quizplus · Accepted Answer

When a nation's currency appreciates and all its liabilities and assets are in a foreign currency, its external wealth increases because the value of its foreign liabilities decreases in terms of its own currency, improving its net external wealth position.

Assume a Nation's External Wealth Is Negative