Suppose There Are Only Two Countries in the World, Countries

question 53

Multiple Choice

Suppose there are only two countries in the world, countries A and B. If the currency of country A appreciates, the currency of country B

• A)must appreciate.
• B)can appreciate relative to other countries.
• C)may appreciate or depreciate, depending on the elasticity of demand for the exports of country A.
• D)must depreciate.
• E)may appreciate or depreciate, depending on the volume of trade between the two countries.

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Definitions:

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