Given a Two-Country World, Assume Canada and Sweden Devalue Their

question 68

Multiple Choice

Given a two-country world, assume Canada and Sweden devalue their currencies by 20 percent.Other things equal, this would result in

• A) an appreciation in the Canadian currency.
• B) an appreciation in the Swedish currency.
• C) an appreciation in both currencies.
• D) an appreciation in neither currency.

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Definitions:

Substitutes

Products or services that can be used in place of each other based on their utility.

Price Elasticity

Price elasticity measures how the quantity demanded of a good is affected by a change in its price, with high elasticity indicating sensitivity to price changes.

Demand

The quantity of a good or service that consumers are willing and able to purchase at a given price over a specified period.

Elastic

Describes a situation where the quantity demanded or supplied of a good is sensitive to changes in its price.